10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from        to

Commission file number 001-32290

GMH Communities Trust
(Exact name of registrant as specified in its charter)

Maryland	201181390
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
10 Campus Boulevard
Newtown Square, Pennsylvania	19073
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (610) 355-8000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares of Beneficial Interest,	New York Stock Exchange
$0.001 par value per share

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o    No  x

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    o        Accelerated filer    x        Non-accelerated filer    o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o  No  x

The aggregate market value of the voting common equity held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2006), was $547,315,290.

The number of common shares of beneficial interest of the registrant outstanding as of March 15, 2007 was 41,567,146 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None.

GMH COMMUNITIES TRUST
INDEX TO FORM 10-K

		Page
Cautionary Note Regarding Forward-Looking Statements		ii
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	30
Item 1B.	Unresolved Staff Comments	55
Item 2.	Properties	56
Item 3.	Legal Proceedings	58
Item 4.	Submission of Matters to a Vote of Security Holders	59
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	60
Item 6.	Selected Financial Data	63
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	64
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	92
Item 8.	Financial Statements and Supplementary Data	93
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	131
Item 9A.	Controls and Procedures	131
Item 9B.	Other Information	135
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	136
Item 11.	Executive Compensation	141
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	161
Item 13.	Certain Relationships and Related Transactions, and Director Independence	164
Item 14.	Principal Accountant Fees and Services	167
PART IV
Item 15.	Exhibits and Financial Statement Schedules	169

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Cautionary Note Regarding Forward-Looking Statements

Our disclosure and analysis in this document and in the documents that are or will be incorporated by reference into this document contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about possible or assumed future events, including, among other things, operating or financial performance, strategic plans and objectives, or regulatory or competitive environments. Statements regarding the following subjects are forward-looking by their nature:

·our ability to successfully implement our current business strategy, including our ability to acquire and manage student housing properties and to secure and operate military housing privatization projects;

·our projected operating results and financial condition;

·completion of any of our targeted acquisitions or development projects, sales of assets, refinancings or joint venture transactions within our expected timeframe or at all;

·our ability to obtain future financing arrangements on terms acceptable to us, or at all;

·estimates relating to, and our ability to pay, future dividends;

·our ability to qualify as a REIT for federal income tax purposes;

·our understanding of our competition, market opportunities and trends;

·projected timing and amounts of capital expenditures;

·our ability to successfully implement remedial measures that will effectively address any deficiencies that have been identified with respect to our disclosure controls and internal controls over financial reporting; and

·the impact of technology on our properties, operations and business.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account the information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Factors that could cause actual results to differ materially from our management’s current expectations include, but are not limited to:

·the factors referenced in the sections of this report titled “Our Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

·changes in our business strategy, including acquisition, sales, and development activities;

·availability, terms and deployment of capital, including equity and debt financing;

·availability of qualified and/or sufficient personnel, including, but not limited, within our accounting staff;

·failure to effectively remediate any deficiencies or material weaknesses in our disclosure controls and procedures and internal control over financial reporting, including through the implementation of such measures as discussed in the section of this report titled “Controls and Procedures” under Part II, Item 9A of this report, or failure to identify additional material weaknesses and deficiencies

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in our disclosure controls and procedures and internal control over financial reporting that could occur in the future;

·the adverse effects of pending litigation or any investigation of the Company by the U.S. Securities and Exchange Commission, or SEC;

·unanticipated costs associated with the acquisition and integration of our student housing property acquisitions and development projects, and military housing privatization projects;

·the effects of military base realignment and closures, or deployments, on installations covered by our military housing privatization projects;

·high leverage on the entities that own the military housing privatization projects;

·reductions in government military spending;

·changes in student population enrollment at colleges and universities or adverse trends in the off-campus student housing market;

·changes in the student and military housing industry, interest rates or the general economy;

·changes in local real estate conditions (including changes in rental rates and the number of competing properties) and the degree and nature of our competition;

·failure to lease unoccupied space in accordance with management’s projections;

·potential liability under environmental or other laws; and

·the existence of complex regulations relating to our status as a REIT and the adverse consequences of our failure to qualify as a REIT.

When we use the words “believe,” “expect,” “may,” “potential,” “anticipate,” “estimate,” “plan,” “will,” “could,” “intend” or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent otherwise required by law.

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PART I

Item 1.Business

GMH Communities Trust commenced operations on November 2, 2004, upon completion of its initial public offering and the simultaneous acquisition of the sole general partnership interest in GMH Communities, LP, referred to throughout this report as our operating partnership. Any historical operations prior to completion of our initial public offering that are described in this report refer to the operations of College Park Management, Inc., GMH Military Housing, LLC, 353 Associates, L.P., and Corporate Flight Services, LLC, which are collectively referred to, together with our operating partnership, as The GMH Predecessor Entities or our predecessor entities. In connection with our formation transactions completed prior to and simultaneously with completion of our initial public offering, the interests in The GMH Predecessor Entities were contributed to our operating partnership as described in Note 1 of the financial statements included in this report.

Our Company

We are a self-advised, self-managed, specialty housing company that focuses on providing housing to college and university students residing off-campus and to members of the U.S. military and their families. Through our operating partnership, we own and operate our student housing properties and own equity interests in joint ventures that own our military housing privatization projects. Generally, we provide through our taxable REIT subsidiaries the development, construction, renovation and management services for our military housing privatization projects and property management services for student housing properties owned by others. In addition, through our operating partnership, we provide consulting services with respect to the management of certain student housing properties owned by others, including colleges, universities and other private owners. We are one of the leading providers of housing, lifestyle and community solutions for students and members of the U.S. military and their families.

As of December 31, 2006, we owned or had ownership interests in 77 student housing properties, containing a total of 14,432 units and 46,696 beds. We also owned seven undeveloped or partially developed parcels of land held for development as student housing properties, and we managed a total of 18 student housing properties owned by others, containing a total of 3,053 units and 9,900 beds, as well as 51 units and 279 beds currently under construction.

With respect to our military housing segment, as of December 31, 2006, our operating partnership had an ownership interest in, and through various wholly-owned subsidiaries operated, nine military housing privatization projects, comprising an aggregate of approximately 17,489 end-state housing units on 21 military bases. End-state housing units are the housing units, including units subject to new construction and existing units, whether or not subject to renovation, that are approved for completion and management by the end of the initial development period, or IDP,  for the project. On October 23, 2006, we announced that we had been chosen by the Department of the Army to design, construct and manage two single soldier housing projects, located at Fort Bliss and Fort Stewart. These two projects are among the first of unaccompanied housing privatization awards made by the Army. On November 30, 2006, we announced the expansion of our Fort Carson project, covering an additional 396 end-state housing units over an existing inventory of 2,664 end-state housing units, and having a three-year IDP with total project costs estimated at $124 million. In addition, on February 6, 2007, we closed on our AETC Group I project with the Department of the Air Force, a military housing privatization project covering four bases and 2,875 end-state housing units. The AETC Group I project represents our first military housing project with the Department of the Air Force. Also, on February 26, 2007, we announced that we were selected by the Department of the Navy to enter into exclusive negotiations for the design, construction, management and maintenance of the military family housing at 11 Southeast Region Navy bases in five states. The 50-year term of the Navy Southeast project is expected to commence with a six-year IDP that is valued in excess of $700 million and covering approximately 5,501 end-state housing units. On March 8, 2007, we also

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announced that we were selected by the Department of the Army to enter into exclusive negotiations for the family housing privatization project at the U.S. Military Academy at West Point, New York, which is expected to have a five-year IDP with project costs valued in excess of $160 million and cover 628 end-state housing units.

GMH Communities Trust was formed in May 2004 to continue and expand upon the student and military housing businesses of our predecessor entities and other affiliated entities, collectively referred to as GMH Associates. GMH Associates was founded in 1985 principally to acquire, develop and manage commercial and residential real estate, focusing on student housing. Beginning in 1999, GMH Associates also competed for the award of contracts to develop, construct, renovate and manage housing units for members of the U.S. military and their families, referred to as military housing privatization projects.

We seek to capitalize on the highly fragmented student housing market at colleges and universities and the related need for quality and affordable off-campus, privately owned student housing. Focusing on this opportunity, we have, and prior to our formation, GMH Associates had, acquired or entered into joint ventures that acquired student housing properties strategically located near college or university campuses. In addition, we have continued to expand upon the military housing business developed by GMH Associates and to seek the award of additional military housing privatization projects granted by the Department of Defense, or DoD, under the 1996 National Defense Authorization Act.

We elected to be treated as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2004, and intend to continue to qualify as a REIT. We perform certain management and other services relating to student and military housing, which if performed directly by a REIT could adversely affect its qualification as a REIT, through our taxable REIT subsidiaries, GMH Military Housing, LLC and College Park Management TRS, Inc. A “taxable REIT subsidiary” is an entity, taxed as a corporation, in which a REIT directly or indirectly holds shares and which makes a joint election with the REIT to be treated as a taxable REIT subsidiary of the REIT. Taxable REIT subsidiaries are generally subject to federal income taxation in the same manner as regular corporations and not as REITs. The extent to which a REIT can conduct its operations through a taxable REIT subsidiary is limited by provisions of the Code, which require that (i) dividends from a taxable REIT subsidiary, together with other nonqualifying gross income of the REIT, constitute not more than 25% of the REIT’s gross income in any taxable year and (ii) securities issued by taxable REIT subsidiaries represent not more than 20% of the value of the REIT’s total assets as of the close of any quarter of a taxable year of the REIT.

Our Internet address is www.gmhcommunities.com. We make available free of charge on or through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it, to the SEC. Our Internet website and the information contained therein or connected thereto do not constitute a part of this Annual Report on Form 10-K.

2007 Business Strategy

In December 2006, we announced that our management expected to implement a business strategy in 2007 that would involve the sale, refinancing and/or entrance into a joint venture covering a number of our currently-owned student housing properties. The proceeds from these transactions will be used to repay outstanding indebtedness under our line of credit with Wachovia Bank, which has an initial maturity date of June 1, 2007. In connection with this business strategy, we completed the refinancing of four of our currently-owned student housing properties in February 2007, for a total of $90 million in new 10-year mortgage debt at a fixed interest rate of 5.6%. We used the net proceeds from this refinancing to pay down $73.6 million in outstanding borrowings under our line of credit, which resulted in the replacement of the indebtedness under the line of credit that was carrying a variable LIBOR-based interest rate of 7.32% as of

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the date of the refinancing. Immediately following this transaction, we had approximately $138 million in remaining borrowings outstanding under our line of credit.

As of the date of this report, we had executed letters of intent to sell seven of our currently-owned student housing properties, as well as a non-binding letter of intent with a third party institutional investor to form a joint venture that will cover an additional six of our currently-owned student housing properties. For more information on our properties that are subject to these letters of intent, see Item 2 of this report titled “Properties.” Although these transactions were still in the due diligence phase as of the date of this report, and we have not executed binding agreements, we currently expect to complete them during the second quarter of 2007. The proceeds from these transactions also will be used to repay outstanding indebtedness under our line of credit. Based on the terms provided under these letters of intent, we expect to receive a sufficient amount of net proceeds from these transactions to pay down the remainder of our outstanding indebtedness under our line of credit.

Student Housing Business

Overview

Through its development, redevelopment and strategic acquisitions of student housing properties, directly and indirectly through joint ventures, our management team has led GMH Communities Trust to become, as measured by our internal competitive analysis estimates, one of the largest private operators of off-campus housing for college and university students in the U.S.

We seek to acquire and manage high quality student housing properties strategically located near college or university campuses and other points of interest, such as restaurants or other nightlife destinations that cater to students. The properties we seek to acquire and manage include town homes and high-rise, mid-rise and garden-style apartment complexes. The amenities we offer residents vary by property, but include many of those commonly sought by students, such as private bedrooms and bathrooms, high quality student furnishings, cable television, wired and wireless high speed Internet access, a washer and dryer in each unit, fitness centers, swimming pools, computer centers, study rooms and game rooms. Additionally, we strive to create attractive environments for our residents by providing, among other things, student housing employees living on-site as well as 24-hour maintenance and emergency services. Although we target student residents, a small percentage of our residents are non-students.

We believe there are substantial opportunities to acquire and manage off-campus student housing. Currently, the student housing market is highly fragmented and primarily served by local property owners. In addition, a significant number of existing student housing properties are obsolete, creating demand by students for high quality housing and premium services. We also believe that, because of the structural and functional obsolescence of many existing on-campus and off-campus student housing properties, future opportunities may exist to establish joint ventures with colleges and universities to manage, lease, renovate or develop on- and off-campus student housing, although we have not yet entered into any such arrangements. Opportunities may exist for us to participate in these arrangements through the ownership or leasing of properties or otherwise.

We believe that the student housing industry has been under managed to date, and that the key factors in the successful execution of our business plan include, among other things, the provision of high quality student housing with a high degree of customer interaction, the implementation of well-managed marketing, leasing, maintenance, retention and collection programs for our properties and the ability to incentivize our management by empowering them to achieve specific objectives.

We will only consider opportunities for those types of arrangements in the student housing business that are consistent with our ability to maintain our status as a REIT for federal income tax purposes. In order to qualify as a REIT, a specified percentage of our gross income must be derived from certain

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sources, including rents from real property (and generally excluding income from the operation of non-rental related assets).

Strategy

From a growth perspective, our strategy in the student housing business is to acquire, own and effectively manage a diverse portfolio of attractive and high quality off-campus student housing properties located near college and university campuses throughout the U.S. We focus on owning and operating primarily garden-style apartment complexes, as well as town homes, and high-rise and mid-rise apartment complexes. Our operational strategy is to manage our own student housing properties, as well as those we manage for colleges, universities and private owners, with a focus on catering to the college and university student, whose needs and lifestyle differ greatly from the needs and lifestyle of a typical apartment resident. We implement these strategies as follows:

Target select properties/markets.   We seek to acquire and manage high quality student housing properties strategically located near college or university campuses and other points of interest, such as restaurants or other nightlife destinations that cater to students. We specifically target those acquisition sites that are located near colleges or universities with a student enrollment of at least 5,000, where the college or university is a primary driver of the local economy and where there is a shortage of existing modern student housing. We seek to identify properties in student housing markets with high barriers to entry and provide strong growth opportunities. We typically target sites within approximately two miles of the college or university campus. Our management team has found that most students prefer to live within a narrowly-defined geographic radius around a particular college or university campus because it provides students with the feeling of being a part of the campus community and also shortens students’ commutes to and from classes. We also believe that we have identified a trend of students, particularly upperclassmen, wanting to live near entertainment venues near campus, such as restaurants or nightlife destinations. In order to capitalize on this trend, we intend not only to seek to acquire and manage premium student housing properties strategically located near college or university campuses, but also those properties close to other points of interest close to campus.

We believe that many of the local satellite campuses of large, state-funded colleges and universities have significant growth potential as the main campuses of these institutions begin to cap the number of students accepted. These caps on student enrollment at large, state-funded institutions also have had a positive effect on campus enrollment at competing colleges and universities located near these institutions.

Given our management team’s experience in and knowledge of the student housing market, we believe that we have developed a solid foundation upon which to identify, evaluate and acquire high quality properties in the future. We believe that our size and financial strength gives us a competitive advantage over smaller, less established competitors in our target markets.

Deliver full range of high quality product.   We seek to acquire and manage modern, state-of-the-art town homes and high-rise, mid-rise and garden-style apartments that are tailored to the “student lifestyle.” The typical design layout of a housing unit consists of one to four bedrooms, with a complementary number of bathrooms, centered around a common area consisting of a living room, a dining area and a kitchen. In addition to functionality and appearance, we have found that students want to be offered a variety of amenities, similar to those found at typical luxury apartment communities. Amenities such as private bedrooms and high quality furnishings, cable television, wired and wireless high-speed Internet access, a washer and dryer in each unit, fitness centers, swimming pools, computer centers, study rooms and game rooms are found in some combination at all of our properties. We also employ student housing personnel that live on-site and provide our residents with 24-hour resident services, including maintenance and emergency services.

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Our message to prospective student residents is that our properties provide a home-like environment with state-of-the-art technological capabilities and amenities and services designed to maximize their college or university experience. In our marketing efforts, we convey the message that living at one of our properties, unlike a typical apartment property, is like becoming a part of a small community within the larger college or university community. To this end, we offer regular “events” at our properties, such as athletic competitions, including volleyball and basketball tournaments, “battle of the bands” nights and non-alcoholic social events. We also offer prospective residents a roommate matching program, where students wishing to find roommates provide us with their background information, including their likes and dislikes, so that our property staff may attempt to match these individuals with compatible roommates.

Each of our properties is managed, leased and maintained by an experienced staff of on-site employees. These employees are available to our student residents around the clock to provide routine maintenance service or to assist in emergencies. We also employ regional vice presidents who are responsible for coordinating the operations of our properties within each of their respective regions. Our management team works closely with the college and university housing and development staffs near our properties to ensure that the needs of students, parents and the institutions are being met throughout the year. For example, our management team coordinates with colleges and universities to provide students with access, where available, to the college or university computer network from each property’s computer room or from student apartment units, and to become an approved provider of student housing for the local college or university.

We have developed specific management systems that are designed to optimize student housing operations and to maintain the value of our properties. These systems include implementing standard lease terms that generally require parental guarantees, making frequent and regular apartment inspections conducted during the course of the lease term, and maintaining and distributing a “price list” to our residents for any property damages incurred during the lease term and thereby incentivizing students to maintain their units. Two exceptions for which we generally do not seek parental guarantees include leases with international students, due to the high burden of obtaining or collecting on guarantees from parents of students who are not located in the U.S., and leases with residents who provide evidence of satisfactory personal income.

Superior execution of operations.   We utilize dynamic, professional marketing services primarily to create web- and Internet-based applications to market and make information about us and our properties easily accessible to students, and initiate word-of-mouth campaigns to attract student residents. Recognizing the importance of the Internet, we have an individualized website dedicated for each of our student housing properties containing information about each property, amenities and services available at each property and pricing and leasing information. To a lesser degree, we also advertise through more traditional media, such as radio and print, particularly focusing on media such as student-run newspapers that target the student market.

The support of colleges and universities is beneficial to the continued success of our off-campus properties and, to this end, we actively seek to have these institutions recommend our properties to their students. Specifically, we attempt to enter into informal arrangements with colleges and universities to have them include information about certain off-campus properties that we manage on their home pages and to have them provide direct hyperlinks to these properties’ websites, in addition to distributing brochures relating to these properties. We currently have arrangements with several educational institutions that provide their students with informational materials directing them to our properties. In cases where colleges and universities do not offer active recommendations for our off-campus housing, most nonetheless provide lists of suitable off-campus properties to their students. We continually work to ensure that our properties are on these lists in each of the markets that we serve.

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Many of our properties are all-inclusive, meaning that we attempt to simplify the bill-paying process by including all costs associated with living at our properties, including water, electricity, gas, cable services and Internet services, in one monthly rental check to be paid to us by students or their parents. We limit our exposure to excessive utility bills from residents by setting a reasonable limit on how much we will pay per resident per month for a particular utility, such as water or electricity. If a resident’s monthly bill for a utility exceeds the set limit, the excess cost may be charged to the resident on a subsequent bill.

In addition to our streamlined bill-payment system, we believe that our method of leasing is attractive to student residents and their parents. Under a traditional apartment lease, housing units are leased by the unit, and, therefore, all residents living in a particular unit are responsible for any liabilities of their roommates. We circumvent this situation by typically leasing our housing units by the bed, not the unit. As a result, students in our properties are contractually responsible for making only payments associated with their individual or pro-rata use of the unit.

We seek to maximize income by operating at a high level of efficiency through intensive management and prudent capital expenditures. In addition, property acquisitions in our target markets should permit us to increase student awareness of our properties through our cross-marketing programs, gain economies of scale by enabling us to consolidate management and leasing services and reduce costs of capital goods, supplies, furniture and other goods and services bought in bulk.

Student Leases

Our property leases typically contain the following terms:

·a 12-month lease term (rent payable in equal monthly installments);

·rent payments typically include charges for all amenities provided at the property, such as basic cable, Internet service, a fitness center, a swimming pool and usually parking, or some combination of these, and in many instances unit interior charges for utilities such as water, gas, sewer and electric, subject to a monthly utility cap per unit;

·a guarantee by parents or legal guardians, relating to, among other things, the amounts payable under the lease, unless a resident can provide evidence of satisfactory personal income, or international residence status;

·require that residents pay a security deposit and/or a non-refundable move-in fee. The deposit is applied against any damages to the unit caused by the resident (including furnishings and household items in the unit). Residents and their lease guarantors also are required to assume personal responsibility for any damages caused to a unit or common areas of a property;

·restrictions on the subletting of units without our prior written consent;

·lease default provisions in the event of failure to pay rent when due, breach of any covenant contained in the lease or abandonment of the unit; and

·extensive rules and regulations governing the property and the behavior of residents in order to ensure effective controls.

Lease Administration and Marketing Systems

We believe we are an industry leader in identifying and implementing solutions to improve the on-site decision-making processes of local management at each of the college and university communities where we either own or manage properties. We continue to focus on student housing information technology innovations, including customizing web-based applications designed to reduce operating costs, reacting

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quickly to frequent leasing and market changes and improving real-time operating information and services to student residents.

We have implemented state-of-the-art, real time systems that provide for on-line resident applications, on-line work orders and facilities management and occupancy reporting. We also have an on-line payment system which is currently being used to facilitate all credit card payments at most of our student housing properties. These exclusive systems have dramatically improved the efficiency of our operations and have improved services to an increasingly tech-savvy student market.

Additionally, we have created a web-based infrastructure designed to standardize systems and procedures to improve data tracking at all levels within our student housing business. These systems provide us with real-time access to customized data management tools that track leasing, occupancy, expenditures and purchases through national accounts, and with other e-business solutions designed to improve the speed and accuracy of our property management services.

Market Opportunity

The Student Housing Market

Demographic patterns and trends in education over the past several years suggest that there are an increasing number of college-aged individuals and an increasing number of students enrolling in colleges and universities in the U.S. According to a 2005 report by the U.S. Department of Education’s National Center for Educational and Statistics or NCES, fall enrollment at four-year institutions of higher education in the U.S. is expected to increase from the 17.3 million students that were enrolled in 2004 to 19.5 million in 2014.

The major catalyst for projected enrollment increases, and subsequent student housing demand in the near future, will be the growth in the college-aged population represented by the “Echo Boom” generation, which is made up of the sons and daughters of the “Baby Boomer” generation, and is equal in size to the Baby Boomer generation. While the Baby Boomers are nearing retirement, much of the Echo Boom generation, which was born between 1977 and 1997, is entering, or has yet to enter, adulthood. According to the U.S. Census Bureau, in 2003, 4.0 million Americans turned 18; by 2010, that number will peak at 4.4 million and remain above 4.0 million annually for some time thereafter.

The impact of demographic changes on college enrollment levels will not be felt equally across all states. During the past decade, the fastest growth of post-secondary enrollment has been concentrated primarily in the Rocky Mountain States and the Sunbelt, which consists of the Southeast and Southwest portions of the U.S. The Sunbelt, Pacific and Northeast regions of the U.S. are projected to be the fastest growing regions in college enrollment between 2000 and 2010, fueled by above average growth projections, in the young adult population in these regions.

Among individual states, California, Florida, Texas and New York are projected to have the four largest populations of 18 to 24 year-olds during the next decade, according to the U.S. Census Bureau’s April 2005 projections. We expect these states will continue to serve as major immigration gateways, which also should bolster future demographic and accompanying college enrollment growth well into the future. These four states are forecasted to experience the greatest absolute increase in college enrollment. Rounding out the top ten states with the highest absolute population growth projections for 18 to 24 year-olds are North Carolina, Virginia, Maryland, Arizona, Georgia and Washington. As of December 31, 2006, more than 38% of our student housing properties were located in these “top 10” states.

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As of December 31, 2006 and based on the U.S. Census Bureau’s April 2005 projections, the states in which we owned properties were projected to experience an average growth of 11.9% in the 18 to 24 year-old population, which is an average of 84,221 persons between 2000 and 2010.

We believe that these projected increases in the 18 to 24 year-old population and in college student enrollment will place a greater demand on off-campus student housing. While both on- and off-campus student housing markets will compete for these additional students, we believe that existing on-campus properties will be at a disadvantage because, according to NCES data, those properties tend to be older units that have not been sufficiently expanded, renovated or modernized to meet students’ increasing needs and expectations.

Highly Fragmented Ownership of Student Housing Properties

The student housing market is highly fragmented, and consolidation in the industry has been limited. Based upon our internal competitive analysis estimates, we believe that there are fewer than 12 firms that own a multi-regional network of off-campus student housing properties and have the ability to offer an integrated range of specialized student housing services, including design, construction and financing.

Our management experience suggests that none of the specialized student housing firms dominates a particular region. Instead, they each seek to maintain a presence in multiple markets with large student populations. Therefore, most are active in the same markets, particularly Texas, California, Florida, Georgia, North Carolina and Pennsylvania, due primarily to the presence of large state university systems that allow developers and operators to take advantage of economies of scale. In contrast, the Northeast, Southwest and Pacific Northwest are three regions in which small, local owner-operators have significant market share.

Status of the On-Campus Student Housing Market

As student enrollment increases, we believe that one of the biggest challenges facing many colleges and universities is an antiquated student housing infrastructure. In addition to the need for additional housing to accommodate an expanding student population, universities must also deal with the problems of maintaining, refurbishing and marketing their aging existing inventory. Many schools have undertaken large-scale renovations and others are under pressure to follow suit to stay competitive. In addition to significant cosmetic upgrades, outdated heating and plumbing systems and roofs and windows are being replaced in many on-campus housing facilities. In some cases, institutions are finding that the costs of renovations are often prohibitive and are opting to take existing facilities out of service, thereby creating a greater demand for off-campus student housing.

In addition, various amenities that used to be considered rare luxuries in the student housing industry, such as kitchens, private bedrooms and bathrooms, Internet connectivity and cable television systems, and a washer and dryer in each unit, are now more common and increasingly becoming a factor in a student’s housing and university selection.

In addition to increasing costs associated with the renovation of existing on-campus student housing by colleges and universities, budget deficits or budget restrictions are affecting the amount of funds available to colleges and universities for education, thereby limiting states’ abilities to increase funding for student housing projects. According to the Center for the Study of Education Policy, state appropriations for higher education have been decreasing consistently. Each state’s ability to boost post secondary education spending, while simultaneously handling the strain on health care budgets from a rapidly aging population and increasing funding to primary and secondary education, remains to be seen. Traditionally, both health care and primary education have taken precedence over higher education for political reasons. Based on information provided by the Association of Governing Boards of Colleges and Universities, we believe it is unlikely that states will have enough money to fund all programs completely. As a result of

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these trends in state budgets, we believe public universities’ finances are straining their capacity to fund significant capital projects such as student housing.

Supply of Student Housing

Based upon current projections of enrollment growth, we believe that colleges and universities will be unable to meet the increase in student housing demand with traditional on-campus housing, thereby creating incremental demand for off-campus student housing. Furthermore, our management experience suggests that college and university students increasingly prefer to live in modern, off-campus housing that provides greater privacy and modern amenities, rather than live in on-campus dormitories. Consequently, we believe colleges and universities are turning to private sector developers to bridge the gap between demand for on- and off-campus housing and their ability to provide additional on-campus housing from their own capital resources.

We expect new construction and development by colleges and universities, various commercial developers, real estate companies and other owners of real estate that are engaged in the construction and development of student housing to compete with us in meeting the anticipated increased demand in student housing over the next 10 years. The development and construction of new student housing properties is extremely capital intensive. Since leases are typically executed for an August or September delivery, construction delays can cause late completion and jeopardize rents for an entire year. As a result, we are pursuing several development opportunities in high barrier-to-entry markets, but we intend to focus our efforts on acquiring existing properties or acquiring newly constructed properties from third party developers in our target markets.

We believe that we are well-positioned to capitalize on the projected shortage of student housing in the U.S. due to our management’s experience in the student housing industry, the economies of scale afforded by our size, our access to capital for the acquisition of additional student housing, our high quality student housing product and our systems designed to optimize student housing operations.

Management Services

As of December 31, 2006, we managed all of the student housing properties owned by us and 18 student housing properties not owned by us. We manage the student housing properties not owned by us through our taxable REIT subsidiary, College Park Management TRS, Inc. For more information regarding the properties we manage for others, see the section of this report under Part I—Item 2 titled “Properties.”

Investment Criteria

In analyzing proposed student housing acquisitions, we consider various factors including, among others, the following:

·the ability to increase rent and maximize cash flow from the student housing properties under consideration;

·whether the student housing properties are accretive, or will become accretive, to our per share financial performance measures;

·the terms of existing or proposed leases, including a comparison of current or proposed rents and market rents;

·the creditworthiness of the student residents and/or parent guarantors;

·local demographics and college and university enrollment trends, and the occupancy of and demand for similar properties in the market area, specifically population and rental trends;

·the ability to efficiently lease or sublease any unoccupied rentable space;

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·the expected capital improvements to be made to the property and the ability of the student housing property to achieve long-term capital appreciation;

·the ability of the student housing property to produce free cash flow for distribution to our shareholders;

·the age and projected residual value of the student housing property;

·the location of the property, including its proximity to a college’s or university’s main campus or other academic buildings, as well as athletic and other entertainment venues frequented by students;

·the opportunity to expand our network of relationships with colleges and universities as well as other strategic firms; and

·potential effect on our REIT status.

Underwriting Process

We have designed our underwriting strategy to enable us to deliver attractive risk-adjusted returns to our shareholders. Our acquisition selection process includes several factors, including a comprehensive analysis of the property’s profitability, financial trends in a property’s revenues and expenses, barriers to competition, the need in a property’s market for the type of student housing services provided by the property, the strength of the location of a property and the underlying value of a property. We also analyze the operating history of each property, including the property’s earnings, cash flow, occupancy, student mix and anticipated capital improvements, to evaluate its financial and operating strength.

In addition, as part of our due diligence process, we obtain and evaluate title, environmental and other customary third-party reports. Currently, our acquisition/development policy generally requires the approval of our Board of Trustees for all acquisitions and development projects, including acquisitions through joint venture structures, regardless of valuation.

Competition

We compete with other owners, operators and managers of off-campus student housing in a number of markets. The largest of these competitors are Education Realty Trust (NYSE: EDR) and American Campus Communities, Inc. (NYSE: ACC), each of which are national, publicly-traded companies focused on growing their student housing businesses. We also compete in a number of markets with smaller national and regional companies, such as the following: Place Properties, First Worthing, Ambling Companies, Campus Advantage, The Dinerstein Companies, JPI Student Living, The Preiss Company, Paradigm Properties and University Housing Group. In addition, we compete on a highly localized basis with substantial numbers of small, local owner-operators. Currently, the student housing industry is highly fragmented, with no participant holding a dominant market share on a national level. The entry of one or more additional national or regional companies could increase competition for students and for the acquisition, management and development of student housing properties.

There are various on- and off-campus student housing complexes that compete directly with us located near or in the same general vicinity of many of our current and targeted properties. We also are subject to competition for students from on-campus housing operated by colleges and universities, other public authorities and privately-held firms. We also are subject to competition for the acquisition of off-campus student housing with other existing local, regional and national owners and operators of student housing. Further, we generally believe that the pace and size of acquisitions in the real estate industry have increased significantly over the past 10 years. Consequently, prices have generally increased while return on invested capital has fallen.

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Military Housing Business

Overview

In order to address poor housing quality, a significant backlog of repairs and rehabilitations to its military housing units on and near bases, and a shortage of affordable, quality private housing available to members of the U.S. military and their families, Congress included the Military Housing Privatization Initiative, or MHPI, in the 1996 National Defense Authorization Act. Under the MHPI, the DoD was granted the authority to award projects to private-sector companies to develop, construct, renovate and manage military housing. Since 1996, according to statistics available on the DoD’s website as of March 9, 2007, the U.S. military has awarded to private companies long-term agreements and rights to exclusively negotiate agreements with the U.S. military for 78 domestic projects containing, in the aggregate, a total of 160,366 end-state housing units. The DoD has targeted another 41 domestic projects containing an additional 36,674 end-state housing units that have yet to be awarded by Congress, and agreements for the related development, construction, renovation and management services for these additional projects. According to the DoD, the previously awarded privatization projects and projects under exclusive negotiations, together with these additional targeted projects, reflect the opportunity to develop, construct, renovate and manage a total of 197,040 end-state housing units.

As of December 31, 2006, our operating partnership held an ownership interest in, and operated, through various wholly-owned subsidiaries, nine military housing privatization projects at the Department of the Army’s Fort Stewart, Hunter Army Airfield, Fort Carson, Fort Hamilton, Fort Eustis, Fort Story, Walter Reed Army Medical Center, Fort Detrick, Fort Bliss, White Sands Missile Range, Fort Gordon, Carlisle Barracks/Picatinny Arsenal, and eight Navy bases. We refer to these nine projects as the Stewart Hunter project, the Fort Carson project, the Fort Hamilton project, the Fort Eustis/Fort Story project, the Walter Reed/Fort Detrick project, the Fort Bliss/White Sands Missile Range project, the Fort Gordon project, the Carlisle/Picatinny project and the Navy Northeast Region project, respectively. These projects in operation covered 21 domestic bases located in 12 states and Washington D.C., and we expect them to contain approximately 17,489 end-state housing units once full development, construction and renovation have been completed for all the projects.

In addition to our projects in operation at year-end, on February 6, 2007, we officially closed on the award of our AETC Group I project with the Department of the Air Force, which covers four bases and 2,875 end-state housing units. Also, during the fourth quarter of 2006, the Army selected us to design, construct and manage single soldier housing at Fort Bliss and Fort Stewart, which represent among the first of unaccompanied housing privatization projects awarded by the Army to date and are expected to cover an aggregate of up to 840 end-state housing units. We currently expect to close on the award of these two unaccompanied housing privatization projects before the end of 2007.

In addition, on February 26, 2007, we announced that we were selected by the Department of the Navy to enter into exclusive negotiations for the design, construction, management and maintenance of the military family housing at 11 Southeast Region Navy bases in five states. The 50-year term of the Navy Southeast project is expected to commence with a six-year initial development period, or IDP, that is valued in excess of $700 million and covering approximately 5,501 end-state housing units. On March 8, 2007, we also announced that we were selected by the Department of the Army to enter into exclusive negotiations for the family housing privatization project at the U.S. Military Academy at West Point, New York, which is expected to have a five-year IDP with project costs valued in excess of $160 million and cover 628 end-state housing units.

Each of these military housing privatization projects includes the renovation and management of existing housing units, as well as the development, construction, renovation and management of new units over a 50-year period, which, in the case of the Army, potentially could extend for up to an additional 25 years. The 50-year duration of each project calls for continuing renovation, rehabilitation, demolition and reconstruction of housing units through various predetermined project phases.

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Some of the bases included in our military housing privatization projects were targeted for closure or realignment as a result of the most recent round of the Base Realignment and Closure, or BRAC, process, which was initiated in 1988 and reached its fifth and, under current legislation, final round in 2005. On November 9, 2005, the BRAC round was completed when Congress approved the BRAC Commission’s recommendations to close the Naval Air Station in Brunswick, Maine and to close the Walter Reed Army Medical Center in Washington, DC. Under the final BRAC list, the possible number of affected military housing units covered by our existing projects was 700 end-state housing units, all of which units are located at the Naval Air Station in Brunswick, Maine. We believe that the closure of the Walter Reed Army Medical Center will not result in the loss of end-state housing units, as these housing units are likely to be utilized by personnel in the greater Washington, DC metropolitan area. In addition to the reduction in end-state housing units resulting from the anticipated closure of the Naval Air Station, we expect that the number of housing units covered at Fort Bliss/White Sands Missile Range projects may increase as a result of base realignments.

We conduct our military development, construction/renovation and management services for all of our projects, other than our most recent AETC Group I project with the Air Force, through our taxable REIT subsidiary, GMH Military Housing, LLC.

Our Military Housing Privatization Projects in Operation as of December 31, 2006

As of December 31, 2006, we had an ownership interest in and operated nine military housing privatization projects. Each of our projects in operation as of December 31, 2006 included the renovation of existing housing units and the construction of new units. The 50-year duration of each project calls for continued renovation, rehabilitation, demolition and reconstruction of the project. The following table provides a summary of the terms of each military housing privatization project in which we owned an interest as of December 31, 2006.

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Military Housing Privatization Projects in Operation
as of December 31, 2006

Project Name	Location	Initial Development Period(1)	Initial Development Period Expected Completion Date	Initial Development Period Project Costs(2) (in millions)	Expected End-State Housing Units at Initial Development Period Completion Date
					1,868	new units
Fort Stewart and	Hinesville, GA				1,597	renovated units
Hunter Army Airfield	Savannah, GA	8 years	October 2011	$358.2	237	existing units(3)
					3,702
					841	new units
Fort Carson(4)	Colorado Springs, CO	5 years	Completed	Completed	1,823	renovated units
					2,664
Fort Carson Expansion	Colorado Springs, CO	3 years	November 2009	124.3	396	new units
					185	new units
Fort Hamilton	Brooklyn, NY	3 years	May 2007	54.9	43	renovated units
					228
Walter Reed Army					407	new units
Medical Center/	Washington, DC				156	renovated units
Fort Detrick(5)	Frederick, MD	4 years	June 2008	89.3	36	existing units(3)
					599
Fort Eustis/Fort Story	Newport News, VA				651	new units
	Virginia Beach, VA	6 years	February 2011	167.0	473	renovated units
					1,124
					1,959	new units
Fort Bliss/White Sands	El Paso, TX				1,178	renovated units
Missile Range(6)	Las Cruces, NM	6 years	June 2011	440.5	140	existing units(3)
					3,277
Navy Northeast	Brunswick, ME;
Region(7)	Kittery, ME; Newport, RI; Groton, CT; Saratoga Springs, NY; Long Island, NY;				1,251	new units
	Colts Neck, NJ;				1,227	renovated units
	Lakehurst, NJ	6 years	October 2010	612.8	1,786	existing units(3)
					4,264
					310	new units
Fort Gordon	Augusta, GA	6 years	April 2012	110.5	577	renovated units
					887
					209	new units
Carlisle/Picatinny	Carlisle, PA				110	renovated units
	Dover, NJ	5 years	July 2011	78.2	29	existing units(3)
					348
Total				$2,035.7	17,489

(1)The first phase of the project, known as the initial development period, covers the period of initial construction or renovation of military housing on a base, typically lasting three to eight years.

(2)As of December 31, 2006, represents estimated total project costs for the initial development period, including closing, development, construction, financing and related costs and excluding estimated capitalized interest associated with the project. These total project costs are determined at the time we and the relevant military branch execute definitive business agreements to commence the project, and may be modified only upon the approval of a formal change order, which may affect the term of the initial development period as well. See also the section of this report titled “Risk Factors—Risks Related to our Military Housing Business.”

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(3)These units will not be renovated during the initial development period.

(4)Additional financing for the expansion of the Fort Carson project was completed during the fourth quarter of 2006.

(5)Walter Reed has been designated for closure under BRAC. We believe that the closure will not result in the loss of housing units, as these housing units are likely to be utilized by personnel who will be relocating from Walter Reed to nearby military medical facilities.

(6)We are in discussions with the Department of the Army to review the possibility of expanding the number of end-state housing units covered by this project, which if approved, would likely require the placement of additional debt financing on the project

(7)We are in the process of finalizing plans with the Navy to restructure the terms and debt financing for the Navy Northeast Region project as a result of the (i) anticipated closure of the Naval Air Station in Brunswick, Maine, which covers approximately 700 end-state housing units and (ii) need to further reduce the number of end-state housing units for the project overall by an approximate 620 end-state housing units due to changes in area housing market conditions that are affecting occupancy rates for the project. See also the section of this report titled “Risk Factors—Risks Related to our Military Housing Business.”

Military Housing Privatization Initiative

The MHPI is a program authorized under the 1996 National Defense Authorization Act that allows the DoD to award military housing privatization projects to private sector operators. Under the MHPI, private-sector developers may own, operate, maintain, improve and assume responsibility for housing on U.S. military bases. According to the authority granted to it by the MHPI, the DoD can work with the private sector to revitalize military housing over a 50-year ground lease period by employing a variety of financial tools to obtain private capital to leverage government dollars, make efficient use of limited resources and use a variety of private-sector approaches to build and renovate military housing faster and at a lower cost to U.S. taxpayers.

The MHPI is designed to remedy both the poor condition and shortage of current military housing. According to the DoD, in 1997 it owned approximately 300,000 family housing units, on and off U.S. military bases, and estimated that more than 50% of these units required renovation or replacement as a result of insufficient maintenance or modernization over the previous 30 years. The DoD believes that improving the poor housing conditions as well as the shortage of quality, affordable private housing on military bases will significantly improve the morale and quality of life for members of the U.S. military and their families, thereby boosting retention and enrollment in today’s voluntary military forces. The majority of members of the U.S. military and their families live in local communities near U.S. military bases. Most of these members of the U.S. military are enlisted personnel whose salaries are at the lower end of the military pay scale. Their salaries make it difficult for them to find quality, affordable housing within a reasonable commuting distance. Furthermore, many of these communities do not have enough affordable, quality rental housing to accommodate members of the U.S. military and their families. The MHPI provides a creative and effective solution to address the quality housing shortage, and will result in the construction of more housing built to market standards for less money than through the military’s own construction process. Furthermore, traditional military construction requires contractors to adhere to stringent military specifications, which make projects significantly more costly than building to market standards. Commercial construction is both faster and less costly than military construction, and private-sector funds significantly stretch and leverage the DoD’s limited housing funds and, at the same time, open the military construction market to a greater number of development firms and stimulate the economy through increased building activity.

Competitive Bidding Process for Military Housing Privatization Projects

In order to implement the MHPI and foster a coordinated approach by the military branches, the DoD created the Housing and Competitive Sourcing Office to develop the legal, financial and operational aspects of the MHPI. Each military branch assesses its own current and future housing requirements, and determines the best course of action necessary for revitalizing inadequate housing units and keeping its housing inventory in good condition. Each military branch also individually assesses the viability of particular privatization projects and makes the final decision whether to privatize housing on a particular

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base, taking into consideration housing needs and available resources of that branch. Once the military branch and the Office of the Secretary of Defense approve site development, they conduct an industry forum to obtain private-sector input. Though each military branch must follow certain general DoD policy guidelines, each service branch has its own privatization project award program. The solicitation process differs slightly among the various military branches; however, in all cases, a competitive bidding process is the method by which projects are awarded to private-sector developers. Projects are introduced to the private sector through the use of a request for proposal or a request for qualifications. Developers that satisfy the respective military branch’s requirements respond with detailed project proposals, and a selection is made from among them. The project winner is awarded the exclusive right to negotiate the final plan, and assuming approval of such final plan, to develop, construct, renovate and manage family housing at a military base, which, based on our experience, is typically for a 50-year period and, in the case of the Army, contains certain extension rights.

Based on our experience, during the exclusivity period for an Army project, which typically lasts between six and 12 months, the project winner initially enters into a contract with the Army pursuant to which it will create a community development and management plan, or CDMP, relating to the planned development of the awarded project. If the CDMP is approved by Congress, the project winner enters a transition period, ranging from 60 to 90 days, during which it prepares to implement its CDMP, finalizes documentation relating to the implementation of the CDMP, including arranging and negotiating necessary financing and negotiating final documents and agreements with the Army, and prepares to take over the base housing operations on the date of closing. Closing occurs after the transition period when all the documentation and negotiations with the Army have been finalized, at which point the project winner may commence its operation of the project.

Based on our experience, during the period of exclusive negotiations with the Navy, the project winner works towards finalization of required project and environmental documentation, pursues local approvals, develops design plans and working drawings, reaches an agreement with the Naval officials regarding all aspects of the project, and arranges and negotiates necessary financing. Also based on our experience to date, the Air Force ranks bidders based on numerous factors and then enters into exclusive discussions with the highest ranking bidder. If the highest ranking bidder meets the Air Force’s requirements and the project is approved by Congress, then that bidder becomes the “successful bidder.” The successful bidder is then authorized by the Air Force to close the transaction.

The result of these exclusive negotiations will be business agreements that describe all relevant characteristics of the development, and defines all business terms and conditions, schedules and financial arrangements between the parties. This process generally takes approximately six to 12 months to complete from the time of the award to the execution of the business agreement.

Organizational Structure of Our Military Housing Privatization Projects

The operations of our military housing privatization projects are generally conducted through an organizational structure that involves two wholly owned subsidiaries of our operating partnership, GMH Military Housing Investments LLC and one of our taxable REIT subsidiaries, GMH Military Housing, LLC. GMH Military Housing Investments LLC owns equity interests in the various projects. GMH Military Housing, LLC develops, manages and sometimes constructs/renovates the military housing in all of our projects, other than our AETC Group I project, through two of its subsidiaries: GMH Military Housing Development LLC and GMH Military Housing Management LLC, which are referred to as GMH Development and GMH Management, respectively, throughout this report. This organizational structure is described as follows:

The Project Entity.   We typically create a project-specific limited liability company or limited partnership, the Project LLC, to serve as the managing member of the Project Owner. In most of our projects, the Project LLC is a joint venture between GMH Military Housing Investments LLC and a joint venture partner. The joint venture partner typically is a third-party architectural and/or design company or

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construction company with whom we have an existing relationship. GMH Military Housing Investments LLC is the manager of the Project LLC.

In the case of our Navy project, the Project Owner is a joint venture between the Navy and the Project LLC. The Project Owner is created for the purpose of owning the project. The Project Owner is also the ground lessee of the land upon which the project is situated. The Project Owner contracts with GMH Development for project development services, GMH Management for property and asset management, and another wholly owned subsidiary of GMH Military Housing, LLC for design/build services. That design/build entity subcontracts with (i) a joint venture partner for project architectural and design services, (ii) a third party construction company for construction services, and (iii) GMH Management for construction/renovation services. Our Navy project is financed through a combination of equity from the Project Owner and third-party debt.

In the case of our Army projects, the Project Owner is a joint venture between the Army and the Project LLC. The Project Owner contracts with GMH Development, GMH Management and a third-party partner for development, management, renovation, architectural and design and construction services. The Project Owner is created for the purpose of owning the project. The Project Owner also is the ground lessee of the land upon which the project is situated. The Project LLC is typically the manager of the Project Owner. The Army projects are financed through a combination of equity, provided by the Project LLC and the Army (which typically approximates up to 10% of the total project value), and third-party debt (which is typically up to 90% of the total project value).

In the case of our AETC Group I project, the Project Owner is owned entirely by the Project LLC. In the AETC Group I project, the Project Owner contracts with another subsidiary of GMH Military Housing Investments LLC, GMH AETC Management/Development LLC, for property and management, renovation and development services and with third-party providers for architectural/design and construction services. The Project Owner owns the project and is the ground lessee of the land upon which the AETC project is situated. The Project LLC is the manager of the Project Owner. The AETC project is financed through equity provided by the Project LLC and a third-party construction and permanent loan.

Debt Financing for the Project.Financing for our projects is procured through either taxable revenue bonds or conventional commercial lending. Financing is typically obtained at the project closing, which occurs on the date that the relevant branch of the U.S. military transfers operation and management of those housing units at the project to the Project Owner. Based on our management’s experience, we believe the terms of the debt are consistent with the terms typically used for conventional multi-family housing projects. In each instance, the debt generally is non-recourse to us and is secured by a first priority lien on the project and requires the assignment of all of the Project Owner’s rights for the benefit of the bondholders or the lender, as applicable. The security therefore includes the Project Owner’s interest in the ground lease. Based on our experience, the repayment terms require payments of interest only during the first three to seven years of the loan and, thereafter, payments of interest and principal, amortized over a 35- to 45-year period, for the remaining term of the loan. While the Project LLC is able to obtain debt financing for up to 90% of the total value of each project, based on our management’s experience, lenders typically will not lend in excess of a specified debt service coverage ratio projected for the first stabilized year following the end of the initial development period (typically ranging from three to eight years, out of the 50-year project term). Accordingly, if interest rates increase, the Project LLC may be required to finance a greater portion of the project cost with equity. In addition, if the minimum debt service coverage is not met, we may not have access to cash flows from the project, other than for project operating expenses, until the debt service coverage is restored.

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The following diagram shows the structure of all of our projects, other than our AETC Group I project:

As its contribution to the project, the U.S. military branch contributes the existing houses and related improvements and may also contribute cash. The Project LLC also contributes cash, typically at the end of the initial development period for our Army projects, and at the outset of the initial development period, for our Navy project. For the AETC Group I project, the Project LLC contributes cash at the outset of the initial development period. Typically, the Project LLC and the U.S. military branch are not required to make additional capital contributions to the project, and neither is permitted to make any additional contribution to the project without the approval of the other. The Project LLC’s return on investment is dependent on both the structure of the transaction and the U.S. military branch involved.

The Development Company.GMH Development provides development services to our privatization projects, other than the AETC Group I project. These services are provided through development agreements typically having 50-year terms, which extend automatically upon any renewal of the related ground lease. GMH Development generally assists the Project Owner by coordinating and monitoring the planning, design, demolition, renovation and construction activities on the Project Owner’s behalf, including the evaluation of project sites and requirements for each project, assisting the Project Owner with the development of the project schedule and budget, establishing coordination between the relevant military branch and primary contractors, reviewing completed construction and renovation work, and certifying payments or primary contractors for such work. GMH Development also establishes and implements administrative and financial controls for the design and construction of the project and assists the Project Owner in obtaining and maintaining general liability insurance and other types of insurance. These services are provided by GMH AETC Management/Development LLC in the AETC Group I project.

The Project Owner pays GMH Development a base fee equal to a percentage of the total development costs for the project, from the beginning of the initial development period throughout the life of the project. Additionally, GMH Development typically is entitled to receive incentive development fees from the Project Owner upon the satisfaction of designated milestones. During the initial development period, GMH Development is entitled to receive an incentive fee which is based upon a total of the development costs during the period. After the initial development period of a project, the incentive development fees typically are a percentage of total development costs for the remainder of the project term. Milestones for payment of incentive development fees typically include completing a specified number of homes according to schedule, achieving specific safety records and implementing small business or minority subcontracting plans. The combined base and incentive development fees generally ranges from 3.0% to 4.0% for our current projects.

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The Project Owner generally may terminate the development agreement upon written notice to GMH Development if it breaches any of its material obligations under the management agreement and fails to cure such breach within 30 days.

The Construction/Renovation Company and Property Manager.   GMH Management provides construction/renovation and property management services to our privatization projects. Construction/renovation refers to the minor and major renovation work that we perform at our projects. With regard to project construction/renovation, the Project Owner pays GMH Management a base fee equal to a percentage of the total construction/renovation costs for the project, from the beginning of the initial development period throughout the life of the project. Additionally, GMH Management typically is entitled to receive construction/renovation incentive fees from the Project Owner upon the satisfaction of designated milestones. During the initial development period, GMH Management is entitled to receive an incentive fee which is based upon a total of the construction/renovation costs during the period. After the initial development period of a project, the construction/renovation incentive fees are a percentage of total construction/renovation costs for the remainder of the project term. Milestones for payment of construction/renovation incentive fees typically include completing a specified number of homes according to schedule, achieving specific safety records and implementing small business or minority subcontracting plans. The combined base and incentive construction/renovation fee generally ranges from 3.0% to 4.0% for our current projects.

In addition, in certain instances, GMH Management may receive fees relating to the performance of pre-construction/renovation services. These pre-construction/renovation fees are determined on a project-by-project basis, and are paid in proportion to the amount of pre-construction/renovation costs incurred by GMH Management for the project.

With regard to property management, the Project Owner contracts with GMH Management to provide property management services for the project. These services are provided through management agreements, typically having 50-year terms, which extend automatically upon any renewal of the applicable ground lease. GMH Management oversees the leasing of housing units in accordance with the requirements of the ground lease, day-to-day operations of the project, collection of revenues and depositing the revenues into appropriate accounts, day-to-day maintenance of the project, ordinary repairs, decorations, alterations and improvements, completion of backlogged maintenance and repairs, payment of taxes imposed on the project, and compliance with applicable laws and regulations.

GMH Management typically is required to prepare and submit an operating budget for the project to the Project Owner on an annual basis. The management agreement typically grants GMH Management the authority to make expenditures and incur obligations included in the operating budget. GMH Management also has the authority to make certain emergency expenditures.

As standard compensation for the services it provides, in general, GMH Management is paid a base fee, equal to a percentage of effective gross revenue for the project. In addition, GMH Management is entitled to receive an incentive fee from the Project Owner upon the satisfaction of designated benchmarks relating to emergency work order responses, occupancy rates, home turnover and resident satisfaction surveys. The combined base and incentive management fee generally ranges from 3.0% to 4.5% for our current projects.

The Project Owner generally may terminate the management agreement upon written notice to GMH Management if it breaches any of its material obligations under the management agreement and fails to cure such breach within 30 days.

Property management and renovation services for the AETC Group I project are provided by GMH AETC Management/Development LLC.

Design/Build Agreement.In our Navy project, the Project Owner entered into a design/build agreement with a subsidiary of GMH Military Housing, LLC for construction, renovation and architectural and design services that are provided through subcontracts with GMH Management and certain third parties.

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The Ground Lease.   In all our projects, the Project Owner and the Army, Navy or Air Force, as applicable, enter into a ground lease pursuant to which the U.S. military branch leases to the Project Owner the real property upon which a particular privatization project is located. We expect future-awarded privatization projects to operate in a similar fashion. Typically, the initial term of a ground lease is 50 years. With respect to Army privatization projects, the ground lease may be renewable for an additional period of up to 25 years upon request by the Army and acceptance by the Project Owner. As partial consideration for the execution of a ground lease and performance of its obligations thereunder, the Project Owner agrees to design, develop, manage, rehabilitate, renovate and maintain the privatization project. At all times during the term of a ground lease, the U.S. military branch provides the Project Owner access to the privatization project. The use and occupancy of the privatization project is subject to the general supervision and approval of the applicable military branch, and to such rules and regulations as the U.S. military branch prescribes. The Project Owner has the right to lease housing units to non-military or non-DoD tenants if vacancy rates hit certain levels.

Some of the Army ground leases and the Air Force ground lease provide that in the event a base is subject to closure under the BRAC regulations, the Project LLC has the option, subject to then-existing applicable law, to acquire fee simple title to the real property. There is no guarantee that any purchase option agreement will be enforceable or that any corresponding purchase option will be exercisable in the event of a base closure under BRAC. The ground leases on our Navy project, and some of our Army projects, do not provide the Project LLC with a purchase option upon a base closure under BRAC.

Basic Allowance for Housing

The U.S. military’s Basic Allowance for Housing, or BAH, is the primary source of operating revenues of our military housing privatization projects. BAH is a cost of living stipend distributed monthly by the DoD to members of the U.S. military to cover their and their families’ costs of living (i.e., rent and utility expenses) in privately-owned housing, on or near bases. The intent of BAH is to provide members of the U.S. military equivalent and equitable housing compensation based upon the market prices of rental housing in the local housing markets surrounding the U.S. military bases. Each year, Congress must appropriate an aggregate budget for BAH for all of the military branches.

The DoD adjusts, on an annual basis, the BAH stipend to be received by each individual member of the U.S. military to reflect changes in the profile of that particular individual member of the U.S. military. Specifically, a BAH stipend is computed by estimating the market price of housing that the member of the U.S. military would be expected to rent, based upon his or her geographic area, pay grade and number of dependents, adding in average utilities and insurance. The particular geographic area surrounding a military base is called a Military Housing Area, or MHA. In computing a BAH, MHA price data for rentals, average utilities and insurance is collected annually in the spring and summer months when housing markets are most active. Pricing information is surveyed from local apartments, townhouses and duplexes, as well as from single-family rental units of various bedroom sizes. Although BAH rates can decrease for a geographic duty location, members of the U.S. military that collect BAH cannot have the amount of their BAH decreased unless a change in status occurs (except that promotions are specifically excluded in the definition of a change in status), such as a base transfer, a decrease in pay grade or a change in the number of dependents.

Revenue Stream

Typically, a member of the U.S. military who is leasing a housing unit on one of our project bases will elect for his or her monthly BAH to be directly deposited by the government, via wire transfer, into an operating revenue fund controlled by the Project Owner, subject to certain restrictive covenants required by any outstanding construction finance bonds. Rental revenues derived from BAH are subsequently paid out of the operating revenue fund by the Project Owner according to a distributive “waterfall” plan set forth in the Project Owner operating agreement. In general, the BAH revenues associated with our current privatization projects “flow out” of the operating revenue fund on a monthly basis.

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·Operating and Other Expenses.   Operating activities include normal administrative, leasing, marketing and maintenance functions consistent with a typical conventional multi-family project. Expenses relating to these operating activities are financed through equity contributions from the DoD and the Project LLC, debt financing and other operating cash flow derived from BAH. Revenues first are applied to pay operating expenses, including GMH Management’s standard management fee, equal to a percentage of project revenues derived from BAH, monthly utilities, insurance premiums, real estate taxes, if any, and other routine maintenance expenses, such as landscaping and preventative maintenance, associated with the housing units.

·Debt Service (including amortization) and Capital Reserves and Replacements.   The Project Owner then uses remaining revenues to pay down principal and interest on any outstanding indebtedness that was issued to finance a portion of the costs of design, demolition, construction, replacement and renovation of housing on a particular military base. Debt financing, including taxable revenue bonds and commercial lending arrangements, typically covers up to 90% of total project costs. The indebtedness is fully funded at the time we enter into definitive agreements for the project. This indebtedness typically requires payments of interest only during the first three to seven years and is amortized over the remainder of its 35 to 45 year term. The Project LLC allocates revenues to make capital repairs or replacements on any of the existing housing units, such as roofing or siding repairs.

·Incentive-based Subordinated Management Fee.   GMH Management next receives its incentive management fee, equal to a percentage of project revenues, derived from any excess rental revenues from BAH, upon satisfying debt service and certain benchmarks.

·Construction/Renovation Fees and Development Fees.   At the start of a project’s initial development period, which typically ranges from three to eight years and continues throughout the term of the project as we renovate existing housing and develop and construct additional housing on a particular military base, GMH Management and GMH Development are entitled to receive standard and incentive construction/renovation and development fees, respectively. In addition, in certain instances, GMH Management may receive fees relating to the performance of pre-construction/renovation services. These pre-construction/renovation fees are determined on a project-by-project basis, and are paid in proportion to the amount of pre-construction/renovation costs incurred by GMH Management for the project. Construction/renovation fees are equal to a percentage of the total construction/renovation costs, and development fees are equal to a percentage of the total development costs. Development costs include hard costs associated with new construction/renovation, as well as certain soft costs. Generally, the majority of new construction work is completed during the beginning years of an initial development period, while construction/renovation work is completed throughout the initial development period. During the initial development period these costs are paid out of a construction account, which is funded by excess cash flow from rental revenues and proceeds from equity contributions and debt offerings. Excess cash flow, for purposes of funding the construction account, includes cash flow available from BAH rental revenues after payment of operating expenses, debt service, subordinated management fees and preferred returns (to the extent such preferred returns have not been deferred as part of the project financing). The construction account may have an equity sub-account to the extent of equity contributed to the Project LLC. Subsequent to the initial development period, all remaining funds are transferred to a reinvestment account and the construction account is closed. Construction, development and renovation costs will be paid out of the reinvestment account to continuously construct, renovate and rebuild a project. The payment of construction/renovation fees and development fees to us during the life of a project is not subordinate to the payment of any other fees.

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·Preferred Return.   The Project LLC will typically receive, to the extent that adequate funds are available, an annual, minimum preferred rate of return. On our existing projects, this annual minimum preferred rate of return ranges from 9% to 12% of the Project LLC’s initial equity contribution to the project. It should be noted, however, that during the initial development period, the Project Owner is precluded from distributing funds to pay the Project LLC the minimum preferred rate of return. The unpaid amounts generally will accrue and accumulate, and can be used to fund renovation and construction costs, if necessary. If the accumulated funds are not needed to fund renovation and construction costs, they would, at the end of the initial development period, be distributed to pay accrued preferred returns to the Project LLC.

·Split of Remaining Revenues.   Subsequent to the initial development period, any revenues remaining after the annual, minimum preferred rate of return is paid, as described above, are split between the Project LLC and the reinvestment account held by the Project Owner for the benefit of the government. On our existing projects, the total amount that the Project LLC is entitled to receive (inclusive of the preferred return) is generally capped at an annual, modified rate of return, or cash-on-cash return, of between 11% and 17% (depending on the particular project) on its initial equity contribution to the project. The total capital return generally will include the annual, minimum preferred return discussed above. The reinvestment account is an account established for the benefit of the military, but funds may be withdrawn for ongoing construction, development and renovation costs during the remaining life of a privatization project only upon approval of the applicable military branch.

·Return of Equity.   Generally, at the end of a project term, any monies remaining in the reinvestment account are distributed to the Project LLC and the Army, Navy or Air Force, as applicable, in a predetermined order of priority. Typically these distributions will have the effect of providing the Project LLC with sufficient funds to provide a minimum annual return over the life of the project and to result in a complete return of its initial capital contribution. After payment to the Project LLC of the minimum annual return and the return of its initial contribution, all remaining funds will typically be distributed to the Army, Navy or Air Force, as applicable.

In addition, we receive fees from our relationship partners that provide architectural and design or construction services for our military housing privatization projects. These fees are for our efforts and expenses incurred while competing for a privatization project award from one of the U.S. military branches, with such a project award not just benefiting us, but our relationship partners as well. Some examples of the business development services provided by us for the benefit of our relationship partners include acting as the point of contact for, coordinating discussions with, and preparing and making presentations to, the DoD. Additionally, we take the lead in preparing and drafting the transaction documents for a potential privatization project, evaluating and communicating potential privatization project requirements, coordinating marketing efforts, providing information technology and temporary on-site offices, and facilitating potential pilot programs and other development activities. Typically, our partners pay these fees for our business development services to GMH Management, GMH Development and GMH Military Housing Construction LLC, or GMH Construction, another wholly owned subsidiary of our taxable REIT subsidiary, GMH Military Housing, LLC.

Strategy

Selective Growth.   By leveraging the substantial industry experience of our management team, we focus on winning military housing privatization projects on which we selectively choose to bid, based on the strategic importance of the base, and the prime location and profit potential for these projects.

Committed to Superior Management.   In the performance of our obligations under existing military housing privatization projects, our management team has been, and will continue to be, fully committed to

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ensuring that members of the U.S. military and their families have high quality, safe, attractive and affordable housing.

Capitalize on Industry Relations.   Our management team has developed relationships with national and regional firms that specialize in residential and military residence community formation and construction. On October 22, 2003, our subsidiary, GMH Military Housing Investments LLC, entered into a joint venture agreement with a subsidiary of The Benham Companies, LLC, Benham Military Communities, LLC, which sets forth the terms by which Benham will participate in the equity structure on certain of our privatization projects and provide architectural, engineering and design services on those military privatization projects awarded to us. Under this agreement, we and Benham are permitted to bid on future privatization projects independently of the other. We also maintain business relationships with construction companies, such as Centex Construction Company, LLC and Phelps Development LLC, pursuant to which these third parties provide construction services to certain of our awarded military projects. We team with these companies because of their proven experience in the construction industry, as well as their size and strength to undertake and to bond construction work on the large, complex military housing privatization projects. Additionally, these business partners pay fees to GMH Management, GMH Development or GMH Construction for our business efforts and expenses associated with attracting and winning military privatization projects. We believe that the retention of highly experienced national and regional companies will provide us with significant competitive advantages in pursuing and winning new privatization projects.

Acquire Existing Military Housing Privatization Projects.   We will consider using our financial strength and management’s past experience to acquire competitors or the military housing privatization projects that have been awarded to them. For example, in November 2003, GMH Associates acquired the military housing privatization project for Fort Carson in Colorado Springs, Colorado as well as the right to exclusively negotiate the Fort Eustis/Story project out of unrelated bankruptcy proceedings instituted by an entity affiliated with the J.A. Jones Corporation. In addition, in February 2006, we acquired from American Eagle Communities Northeast, LLC the right to exclusively negotiate the Carlisle/Picatinny project. The military housing privatization projects are typically very large and complex. As a result, they require experienced and committed larger scale operators who have the financial strength to develop, construct, renovate and manage housing units during the initial development period of a project, which typically ranges from three to eight years, and then administer the continuing development, construction, renovation and management of housing for the remainder of the 50-year project term. The obligations to be performed under these projects are extremely difficult for smaller, regionalized companies to meet, and we believe our experience in the military housing market provides us with a material competitive advantage in this regard. As the number of new privatization projects grows, we believe our potential to acquire such projects for additional bases will grow correspondingly.

Market Opportunity

As of March 9, 2007, according to the information made available by the DoD, the remaining military family housing privatization market contains 36,674 housing units to be privatized through 41 additional projects. These remaining housing units are expected to generate approximately $590 million in total annual rental revenue based on the 2007 average BAH of approximately $16,100 per year. As of March 9, 2007, awarded projects and exclusive negotiations represent 160,366 end-state housing units through 78 projects.

Although the DoD’s program has focused its efforts almost exclusively on the privatization of family housing, the next stage of development will include the privatization of unaccompanied personnel (bachelor) housing. For example, during the fourth quarter of 2006, the Army selected us to design, construct and manage single soldier housing at Fort Bliss and Fort Stewart, which represent among the first of unaccompanied housing privatization projects awarded by the Army to date and are expected to

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cover an aggregate of up to 840 end-state housing units. We currently expect to close on the award of these two unaccompanied housing privatization projects before the end of 2007. In addition, the Navy has identified three initial sites which will serve as a pilot program for the privatization of unaccompanied military personnel housing, one of which has yet to be awarded and which we expect to solicit for award during 2007.

We believe the potential market for unaccompanied personnel housing is significantly larger than that for family housing. Given our management’s experience in bidding on military housing privatization projects, coupled with their extensive student housing experience, we believe that we will have a competitive advantage in bidding for privatization projects in the unaccompanied housing market; however, we cannot assure you that the DoD will privatize any of these unaccompanied military personnel housing units beyond those that have already been awarded.

Our military housing strategy includes the pursuit of already privatized bases from competitors which have been awarded targeted projects. As the number of new privatization projects grows, the potential for our targeted acquisition of already privatized bases will grow correspondingly.

Additional Military Housing Privatization Projects and Development Opportunities under Review

In addition to the military housing privatization projects for which we have been selected, our management team also had under review, as of March 9, 2007, six additional potential privatization project opportunities. These projects span multiple bases and total, in the aggregate, approximately 11,800 end-state housing units. Individual projects identified as opportunities range from approximately 900 to 4,700 end-state housing units per project. We consider a project as “under review” once a base has been identified by the DoD for privatization and our management begins initial due diligence and evaluation of the economic and strategic value of the project. After further due diligence, we may decide not to pursue any of these potential privatization projects.

Competition

Competition pursuing this business has evolved from a select number of local and regional development firms in 1996, to a distinguished group of national and international developers, owners and operators of commercial and residential real estate.

Profile of Major Competitors

Company Name	Awarded Projects(1)		Number of Units
Actus Lend Lease		10		33,220
Clark Realty		11		32,094
Picerne Military Housing		5		17,559
American Eagle Communities, LLC		6		8,369
Lincoln Properties		10		31,560
Hunt Building Corporation		20		25,912
Equity Residential Properties Trust		1		3,982
Forest City Enterprises		4		7,298

Source:  Information reported by the DoD as of March 9, 2007.

(1)Includes projects for which exclusive rights of negotiation have been awarded.

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Financing Strategy

Our targeted leverage ratio is in the range of 45% to 60%. Our debt level changes as we acquire properties or projects and refinance existing properties. The amount of total indebtedness we decide to incur during any particular period depends on how we structure and finance our property acquisitions and the current market cost of debt. The formula we use to calculate our leverage ratio is as follows:

Total debt

Total market capitalization

As of December 31, 2006, our leverage ratio was approximately 62.3%. Neither our declaration of trust nor our bylaws requires us to maintain a specific leverage ratio and we may determine to exceed the maximum range of our target ratio depending on the circumstances. If we determine to exceed the maximum range of our target ratio, we may do so without shareholder approval. We will generally decide whether to use debt or equity financing to acquire a property by considering the most attractive interest rates, repayment terms and maturity dates available in the marketplace at the time, and customize our financing strategy for each individual transaction. We also may obtain unsecured and/or secured financing through public and private markets. We will access various sources of capital including banks, financial institutions and institutional investors through lines of credit, bridge loans and other arrangements, including joint ventures with third parties. We also may finance the acquisition of properties through additional equity securities offerings, including offerings of preferred or common stock or units of our operating partnership.

We currently have a secured $250.0 million revolving line of credit with Wachovia Bank, National Association. As of December 31, 2006, we had approximately $199.4 million in outstanding borrowings drawn from this credit facility, which funds were used as financing for acquisitions, payment of our third and fourth quarter 2006 dividend distributions, and for working capital and other general corporate purposes. Other than with respect to pending student housing acquisitions, investments in military housing projects and certain limited working capital needs that have been pre-approved by our lender under the line of credit, we must obtain consent from the lender with respect to the use of additional funds drawn on the line. In addition, other than certain pending transactions that have been pre-approved by our lender, we are restricted from incurring any additional indebtedness (including mortgage indebtedness on student housing properties that we may acquire) without the lender’s prior consent. See also “Dividend Policy and Distributions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in this report. Any additional indebtedness that we pursue in the future may be recourse, non-recourse, unsecured, secured or cross-collateralized. If the indebtedness is recourse, general assets of the debtor may be included in the collateral. If the indebtedness is non-recourse, the collateral will be limited to the particular property to which the indebtedness relates. In addition, we may invest in properties subject to existing loans secured by mortgages or similar liens on the properties or refinance properties acquired on a leveraged basis. We may use the proceeds from any borrowings to refinance existing indebtedness, to finance acquisitions or the redevelopment of existing properties, for general working capital or to purchase interests in partnerships or joint ventures.

During the fourth quarter of 2006, we announced that our management expects to implement a business strategy beginning in early 2007 that will involve the sale, refinancing and/or entrance into a joint venture with respect to a number of our currently owned student housing properties. The proceeds from these transactions will be used primarily to repay outstanding indebtedness under our line of credit, which has an initial maturity date of June 1, 2007. As part of this strategy, we also are seeking to obtain a replacement line of credit in order to provide funds needed (i) to acquire additional student housing properties or interests in such properties, (ii) to invest in additional military housing projects, or (iii) to fund future working capital needs. There can be no guarantee that our management team will be able to

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execute upon this business strategy at all or on terms that are currently anticipated, and we must obtain approval from the lender under our current line of credit with respect to our business strategy while the line of credit remains effective. To the extent that we are unable to successfully implement our business strategy at all or on terms that are currently anticipated by our management team, then we would be required to identify other sources of capital to repay the outstanding indebtedness under our line of credit, which may be extended only through October 2, 2007. For a discussion of the risks associated with failure to implement this business strategy, see the section of this report titled “Risk Factors—Risks Relating to our Business and Growth Strategy.”

Line of Credit

On October 2, 2006, our operating partnership entered into a $250.0 million secured revolving credit facility with Wachovia Bank, National Association. Simultaneously with the execution of the loan agreement covering the line of credit, GMH Communities Trust, and several direct and indirect subsidiaries of our operating partnership, executed guaranty agreements guaranteeing the obligations of the operating partnership under the line of credit. As collateral security for the borrower’s obligations under the line of credit, we, our operating partnership and several of its direct and indirect subsidiaries that own and operate our student housing operations, including third-party management contracts, and our military housing privatization projects, entered into a Security Agreement, dated October 2, 2006, in favor of the lender. Pursuant to the Security Agreement, the parties granted a security interest in the assets owned by each respective party. As additional collateral security for the borrower’s obligations under the line of credit, our operating partnership and several of its direct and indirect subsidiaries that own the student housing properties that were previously unencumbered under our former credit facility, and the student housing properties that we acquired pursuant to our Capstone portfolio acquisition, also entered into a Pledge Agreement, dated October 2, 2006, in favor of the lender. Pursuant to the Pledge Agreement, the parties thereto have granted a security interest in the equity interests in the entities that own, directly or indirectly, the aforementioned student housing properties, our third-party management business and the contracts pursuant to which we receive management, development and renovation fees with respect to operation of our military housing privatization projects.

The line of credit has an initial term through June 1, 2007, referred to as the Initial Maturity Date, and provides for either of two additional extension options: (i) an additional three month extension through September 1, 2007, referred to as the Option One Maturity Date, in the event that we have entered into a definitive agreement relating to a merger or the sale of substantially all of our assets, which merger/sale agreement has been approved by our Board of Trustees, has been announced publicly and is not subject to financial contingencies; and (ii) an additional four month extension option through October 2, 2007 (provided notice is given no later than fifteen days prior to the later of the Initial Maturity Date or the Option One Maturity Date), subject to payment of a fee in an amount equal to 2.00% of the outstanding principal balance of the loan as of the Initial Maturity Date or the Option One Maturity Date, as the case may be (this extension right is referred to as the Option Two Maturity Extension). In no event, however, will the maturity date of the line of credit extend beyond October 2, 2007.

Our operating partnership borrowed funds under the line of credit in order to finance the Capstone portfolio acquisition, to fund portions of our dividend distributions for the third and fourth quarters of 2006, as well as to fund the equity portion of the purchase price for certain pre-approved student housing acquisitions, investments in military housing projects, and for general working capital purposes as approved by the lender. As of March 15, 2007, we had $138.0 million of indebtedness drawn under the line of credit, after the recent repayment of approximately $73.6 million in net proceeds received from the refinancing of existing mortgage indebtedness on four of our student housing properties. As described above, generally all future draws from the line of credit will be subject to approval by the lender.

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Indebtedness under the line of credit bears interest at an annual rate of LIBOR plus 2.00% through the Initial Maturity Date of the loan, as well as through the Option One Maturity Date, if applicable. In the event that the line of credit is extended pursuant to the Option Two Maturity Extension, then the applicable interest rate increases to LIBOR plus 4.50%. Under the terms of the line of credit, our operating partnership may request the applicable interest rate period, including 30, 60 or 90-day LIBOR; provided that it may not elect more than five distinct interest periods, in the aggregate, under the loan at any one time. The principal balance of loans shall be due and payable in full on the Initial Maturity Date, or the maturity date under an applicable extension. Upon closing of the line of credit, we paid a commitment fee to the lender in the amount of $2.5 million.

The line of credit contains customary affirmative and negative covenants and also contains financial covenants which, among other things, require that we maintain a consolidated net tangible worth of at least $455.0 million, and a student housing fixed charge coverage ratio of not less than 1.25 to 1.00. In addition, we must maintain a quarterly minimum aggregate Adjusted Management EBITDA (as defined in the line of credit) of $5.0 million. We are also prohibited during the term of the line of credit from creating, incurring, assuming or suffering to exist any additional indebtedness, subject to exceptions described in the line of credit.

The line of credit includes usual and customary events of default for loans of this nature and provides that, upon the occurrence of an event of default, payment of all amounts payable under the line of credit may be accelerated and/or the lender’s commitment may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the line of credit will automatically become immediately due and payable, and the lender’s commitment shall automatically terminate. As of December 31, 2006, we were in compliance with our debt covenants.

Our Operating Partnership

We own our properties and conduct substantially all of our business through our operating partnership, GMH Communities, LP, and its subsidiaries. Holders of limited partnership units of our operating partnership, other than us, after a one-year holding period and subject to earlier redemption in certain circumstances, will be able to redeem their limited partnership units for our common shares on a one-for-one basis, subject to adjustments for share splits, dividends, recapitalizations and similar events. At our option, in lieu of issuing common shares upon redemption of limited partnership units, we will be able to pay holders of units a cash amount equal to the then-current value of our common shares, except that Gary M. Holloway, Sr. will have the right to direct us to issue common shares upon redemption of limited partnership units that he or his affiliates own subject to his restriction from owning more than 20% of the Company’s outstanding common shares. These redemption rights generally may be exercised by the limited partners at any time after one year. Holders of limited partnership units will receive distributions equivalent to the dividends we pay to holders of our common shares, but holders of limited partnership units will have no voting rights, except in certain limited circumstances. As the sole owner of the general partner of our operating partnership, we have the exclusive power to manage and conduct our operating partnership’s business, subject to the limitations described in the partnership agreement of our limited partnership. In connection with the investment by affiliates of Vornado Realty L.P. in our operating partnership, we and our operating partnership have, however, agreed to certain restrictions regarding our activities and assets and the activities and assets of our operating partnership, a violation of which could expose us and our operating partnership to substantial liability for damages. See “Our Business—Our Agreements with Vornado Realty L.P. and its Affiliates Restrict our Activities” below.

Our Agreements with Vornado Realty Trust and its Affiliates Restrict Our Activities

In connection with Vornado Realty Trust’s investment in our operating partnership as it existed prior to our initial public offering, Vornado also purchased for $1.0 million a warrant to acquire units of limited

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partnership interest in our operating partnership, common shares of GMH Communities Trust, or a combination of such units of limited partnership and common shares. Upon closing of our initial public offering, Vornado exercised the warrant to purchase 6,666,667 units of limited partnership interest in our operating partnership at a price of $7.50 per unit. On May 2, 2006, the warrant exercise period ended, and the remaining portion of the warrant automatically converted into 1,817,247 common shares through a net, or cashless, exercise feature under the warrant. We have agreed to register for resale all of the common shares issuable upon exercise of the warrant, including common shares that may be issuable upon redemption of units of limited partnership interest of the operating partnership issued under the warrant.

In connection with Vornado’s investment in our operating partnership, we agreed with Vornado to restrict our activities and investments and those of our operating partnership in a manner intended to facilitate our qualification as a REIT and to prevent our direct and indirect activities and assets, and those of our operating partnership, from having adverse tax consequences to Vornado and its affiliates and transferees. Among other things, these restrictions require that neither we nor our operating partnership, without Vornado’s consent, hold, directly or indirectly:

·securities other than:

(i)equity interests in entities that are treated as partnerships or disregarded entities for federal income tax purposes;

(ii)stock of corporations for which an election to be a taxable REIT subsidiary will be made, or of entities qualifying as real estate investment trusts for federal income tax purposes; and

(iii)securities that are treated as qualifying assets for purposes of the REIT 75% asset test;

·assets that are treated as inventory for federal income tax purposes; or

·REMIC residual interests.

In addition, these restrictions require that neither we nor our operating partnership, without Vornado’s consent, directly or indirectly:

·provide services other than specified services to tenants of our properties other than through an independent contractor or through a taxable REIT subsidiary; or

·operate or manage a health care facility or a hotel or similar facility.

If we breach these restrictions and, as a result, Vornado or certain of its affiliates or transferees fails to qualify as a REIT or otherwise incurs liability for taxes, penalties or similar charges, we and our operating partnership will be required to indemnify Vornado or certain of its affiliates or transferees for all losses, liabilities, costs and expenses attributable to the breach, which may be substantial.

Taxable REIT Subsidiaries

GMH Communities TRS, Inc., a taxable REIT subsidiary that is wholly owned by our operating partnership, is the parent company of both College Park Management TRS, Inc. and GMH Military Housing, LLC. College Park Management TRS, Inc. is the taxable REIT subsidiary through which we provide property management services to certain third party owners of student housing properties, including colleges, universities and other private owners. GMH Military Housing, LLC is the taxable REIT subsidiary through which we manage the development, construction and operation of the properties in our military housing business, among other services that neither we nor our operating partnership can undertake directly under applicable REIT tax rules. Each of our taxable REIT subsidiaries pays income taxes at regular corporate rates on their taxable income.

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Regulatory Matters

Many laws and governmental regulations are applicable to the properties we own or will own, and changes in the laws and regulations, or their interpretation by agencies and the courts, occur frequently. Our current properties and any additional acquired properties must comply with the Americans with Disabilities Act of 1990, or the ADA, and the Fair Housing Amendments Act of 1988, or the FHAA. Under the ADA, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. The ADA generally requires that public facilities be made accessible to people with disabilities. In order to comply with the ADA requirements, we may be required to make improvements at our properties in order to remove barriers to access.

The FHAA, its state law counterparts and the regulations promulgated by the U.S. Department of Housing and Urban Development prohibit discrimination in the sale, rental and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women and people securing custody of children under the age of 18) and handicap or disability, and in some states, on financial capability. Violation of these laws can result in significant damage awards to victims. We have a strong policy against any kind of discriminatory behavior and train our employees to avoid discrimination or the appearance of discrimination. In addition, the FHAA requires apartment properties first occupied after March 13, 1990, to be accessible to the handicapped. The FHAA further requires that we allow residents, at their own expense and subject to our review, to make private facilities within our properties accessible to people with disabilities. When requested by residents, we will attempt to make the appropriate and required accommodations to enable them to make the improvements.

Non-compliance with either the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. We believe that our current properties are, and properties to be acquired will be, in compliance in all material respects with present ADA and FHAA requirements.

Insurance

We maintain general liability insurance that provides coverage for bodily injury and property damage to third parties resulting from our ownership of the properties that are leased and occupied. We believe that our properties are covered adequately by insurance.

Environmental Matters

Under various federal, state and local environmental laws and regulations, a current or previous owner, operator or tenant of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases or threats of releases at such property and may be held liable to a government entity or to third parties for property damage and for investigation, clean-up and monitoring costs incurred by such parties in connection with the actual or threatened contamination. These laws typically impose clean-up responsibility and liability without regard to fault, or whether or not the owner, operator or tenant knew of or caused the presence of the contamination. The liability under these laws may be joint and several for the full amount of the investigation, clean-up and monitoring costs incurred or to be incurred or actions to be undertaken, although a party held jointly and severally liable may obtain contributions from other identified, solvent, responsible parties of their fair share toward these costs. These costs may be substantial and can exceed the value of the property. The presence of contamination, or the failure to properly remediate contamination, on a property may adversely affect the ability of the owner, operator or tenant to sell or rent that property or to borrow funds using such property as collateral and may adversely impact the value of our investment in that property.

Federal regulations require building owners and those exercising control over a building’s management to identify and warn, via signs and labels, of potential hazards posed by workplace exposure

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to installed asbestos-containing materials and potentially asbestos-containing materials in their building. The regulations also set forth employee training, record keeping and due diligence requirements pertaining to asbestos-containing materials and potentially asbestos-containing materials. Significant fines can be assessed for violation of these regulations. Building owners and those exercising control over a building’s management may be subject to an increased risk of personal injury lawsuits by workers and others exposed to asbestos-containing materials and potentially asbestos-containing materials as a result of these regulations. The regulations may affect the value of a building containing asbestos-containing materials and potentially asbestos-containing materials in which we have invested. Federal, state and local laws and regulations also govern the removal, encapsulation, disturbance, handling and disposal of asbestos-containing materials and potentially asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation or demolition of a building. Such laws may impose liability for improper handling or a release to the environment of asbestos-containing materials and potentially asbestos-containing materials and may provide for fines to, and for third parties to seek recovery from, owners or operators of real property for personal injury or improper work exposure associated with asbestos-containing materials and potentially asbestos-containing materials.

Prior to closing any property acquisition, we obtain Phase I environmental assessments in order to attempt to identify potential environmental concerns at the properties. These assessments are carried out in accordance with an appropriate level of due diligence and generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related personnel, review of the property’s chain of title and review of historic aerial photographs and other information on past uses of the property. We may also conduct limited subsurface investigations and test for substances of concern where the results of the Phase I environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures. As of December 31, 2006, we were not aware of any environmental issues regarding our student housing portfolio that would materially adversely affect our student housing business.

While we may purchase many of our properties on an “as is” basis, all of our purchase contracts contain a due diligence contingency clause, which permits us to reject a property because of any due diligence issues discovered at the property.

Employees

As of December 31, 2006, the student housing business employed 470 full-time employees and 970 part-time employees, the military housing business employed 509 full-time employees and seven part-time employees, and we employed in our corporate staff 124 full-time employees. Employees include those at the property level providing services as well as regional and corporate staff directly providing services to both the student housing and military housing properties. Part-time employees are primarily located at the property level in various student housing resident assistance programs. We believe that our relations with our employees are good. As of December 31, 2006, none of our student housing employees were members of an organized labor union; and, with respect to our military housing employees, 13 employees employed at our Fort Gordon project are represented by the Transport Workers Union of America Local 527 and we were in the process of negotiating a collective bargaining agreement with these employees.

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Item 1A.Risk Factors

Risks Relating to Our Business and Growth Strategy

The initial maturity date of our current line of credit is June 1, 2007, and unless we are able to repay outstanding indebtedness under the line at that time, or by any extended maturity date which may be no later than October 2, 2007,  the loss of any of our assets securing such debt could adversely affect our business.

Our current line of credit with Wachovia Bank, National Association, has a maturity date of June 1, 2007, at which time all outstanding indebtedness under the line will become due and payable. As of March 15, 2007, we had $138.0 million in outstanding indebtedness under the line of credit. In December 2006, we announced that our management expected to implement a business strategy beginning in 2007 that would involve the sale, refinancing and/or entrance into a joint venture with respect to a number of our currently owned student housing properties. The proceeds from this business strategy would be used to repay outstanding indebtedness under our line of credit. While the line of credit remains effective, the lender has the sole discretion to approve of various aspects of our business strategy, such as the release of any student housing assets securing the line for sale to third parties or the placement of such assets into a joint venture with a third party. There can be no guarantee that our management team will be able to execute upon its business strategy at all or on terms that are currently anticipated, and therefore that we will be able to obtain the necessary funds to repay the outstanding indebtedness under the line of credit when it becomes due and payable on the initial maturity date. To the extent that we are unable to successfully implement this business strategy at all or on terms that are currently anticipated by our management team, then we need either (i) to extend the initial maturity date, or (ii) to identify other sources of capital in order to repay the outstanding indebtedness under our line of credit at its maturity date. If we elect to extend the maturity date, we would only be able to extend it under the current agreement through no later than October 2, 2007. Such extension would trigger the payment of an additional fee and an increase in the effective interest rates under the terms of the loan. For a discussion of the extension terms of our current line of credit, see the section of this report titled “Our Business—Line of Credit.” To the extent that we elect to extend the initial term of our credit facility and become subject to a higher interest rate on outstanding borrowings thereunder, our results of operations will be adversely impacted. In addition, if we fail to identify the capital necessary to repay our line of credit upon its maturity date (whether or not extended), our lender may pursue its remedies to take control over certain assets that secure the line of credit. The loss of any such assets could impact our ability to qualify as a real estate investment trust and could adversely affect our business.

If we were to default in the future on any of our mortgage indebtedness, the loss of any of our assets  securing such debt could adversely affect our business or result in the secured indebtedness under our line of credit being immediately due and payable.

A substantial portion of our student housing properties are secured by first mortgages. In addition, as discussed in the risk factor above, in connection with obtaining our current line of credit with Wachovia Bank in October 2006, we granted the lender a security interest in the cash flows from our operating partnership and its subsidiaries that own and operate our student housing properties and third-party management contracts. As additional collateral security for our obligations under this line of credit, our operating partnership and several of its direct and indirect subsidiaries that own the student housing properties that were previously unencumbered under our former credit facility, and the student housing properties acquired in our Capstone portfolio acquisition, also entered into a pledge agreement in favor of Wachovia. Pursuant to this pledge agreement, we granted a security interest in the equity interests in the entities that own, directly or indirectly, these student housing properties, as well as our third-party management business and the contracts pursuant to which we receive management, development and renovation fees with respect to operation of our military housing privatization projects. Our cash flow may

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be insufficient to make required payments of principal and interest on our debt. Any default in payment of our indebtedness or violation of any covenants in our loan documents could result in the loss of our investment in the properties or assets securing the debt or result in our debt obligations under our line of credit being immediately due and payable, to the extent that we are unable to obtain waivers of financial covenants from our lenders or amend the loan documents. Additionally, some of our indebtedness contains cross default provisions. A default under a loan with cross default provisions could result in default on other indebtedness.

Our internal control over financial reporting may not be sufficient to ensure timely and reliable financial information.

As discussed under Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2005, in connection with the completion of the audit of our financial statements for the fiscal year ended December 31, 2005 and an investigation performed by our Audit Committee commenced during the first quarter of 2006, the Company identified and communicated to the Company’s independent registered public accounting firm “material weaknesses” involving internal control over financial reporting and its function. Although management’s report on internal control over financial reporting as contained in Item 9A of this report indicates the presence of no material weaknesses in internal control as of December 31, 2006, there can be no assurance that internal control systems will continue to remain effective going forward, or that further remediation efforts will not be required in order to maintain our internal control over financial reporting.

The Company’s growth could continue to place stress on its internal control systems, and there can be no assurance that the Company’s current control procedures will be adequate. Even after corrective actions have been implemented, the effectiveness of the Company’s internal control over financial reporting may be limited by a variety of risks, including faulty human judgment and simple errors, omissions and mistakes, inappropriate management override of procedures, and risk that enhanced controls and procedures may still not be adequate to assure timely and reliable financial information. If the Company fails to have effective internal control over financial reporting in place, it could be unable to provide timely and reliable financial information.

Pending material litigation or the commencement of an investigation by the SEC could adversely affect the Company’s financial condition and results of operations.

There have been several class action complaints filed against the Company and our chief executive officer and former chief financial officer. These complaints allege, among other things, that the defendants committed securities fraud in connection with the offer, purchase and sale of the Company’s common shares between October 28, 2004 and March 10, 2006. As of the date of this report, the court has appointed a lead plaintiff, but the class has not yet been certified. In addition, the sellers of a portfolio of student housing properties that we acquired in June 2005, who received units of limited partnership interests in our operating partnership in connection with the transaction, have filed suit against us under a similar securities fraud claim. The outcome of this litigation is uncertain, and although the Company will defend itself against the claims made in these lawsuits, no assurance can be given as to the outcome of this litigation. For a discussion of this pending and threatened litigation, see the section of this report titled “Legal Proceedings.” Costs associated with defending this securities litigation, or with the payment of any judgments in or settlements of such litigation, could adversely affect the Company’s financial condition and results of operations.

In addition, after we alerted the SEC of the Audit Committee investigation and related matters, the SEC staff initiated an informal inquiry in connection with these matters. If the SEC ultimately investigates these matters, or any restatements of our financial statements, the investigation could adversely affect the Company’s ability to access the capital markets. In addition, the Company could incur significant legal,

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accounting and other costs in connection with responding to any such investigation, and could be required to pay large civil penalties and fines resulting from any enforcement actions that could be instituted by the SEC. The SEC also could impose other sanctions against us or certain of our executive officers. These additional costs, together with the likely strain on management’s time and attention and other of our operational resources in addressing any such investigation, could adversely affect our financial condition and results of operations.

We have reported net losses in the past and may continue to do so in the future.

For the second, third and fourth quarters, as well as for the full year ended December 31, 2006, we reported net losses. These losses were primarily attributable to increased expenses incurred during those periods relating to our previously disclosed Audit Committee special investigation and activities of the Special Committee of the Board of Trustees. We also have experienced increases in expenses relating to our student housing business, and to the extent we are unable to manage those expenses going forward, our operating results from this segment could contribute to additional losses for the Company on a consolidated basis. As referenced in the risk factor above, we also may incur significant legal expenses relating to defending the pending class action securities litigation against the Company. If our student housing and military housing businesses do not generate sufficient revenue from operations to maintain profitability, we may continue to experience losses from operations.

Since our initial public offering, our cash flow from operations has been insufficient to fund our dividend distributions to our shareholders, and it could continue to be so in the future. To the extent our cash flow from operations is insufficient to fund our dividend distributions, we expect to borrow funds or to lower our dividend distributions.

Since completion of our initial public offering, we have used borrowings under our credit facility to pay a portion of dividend distributions to our shareholders. We expect that during 2007 our cash flow from operations will continue to be the primary source of funding for our distributions to shareholders. To the extent that we are unable to fund our dividend distributions with cash flow from operations, we may be required to borrow funds in order to make distributions at historical levels. In the past, we have relied on third-party debt financing, including funds from our line of credit, in order to fund a portion of our dividend distributions. Under our current line of credit with Wachovia Bank, our lender must consent to the use of funds borrowed thereunder for payment of any future dividend distributions. Similarly, if we seek to borrow funds from another lending source, we would be required to obtain prior consent from our lender under the line of credit while it remains effective. There can be no guarantee that our lender will approve this use of funds from the line of credit, or outside borrowing of funds from a third party, for any future quarterly dividend distributions to our shareholders. To the extent that our lender does not approve such use, and we do not have sufficient funds from operations to fund our dividend distributions at historical levels, we may be required to lower our dividend distributions. Any additional indebtedness that we incur with respect to payment of our dividend distributions also will increase our leverage and could decrease our ability to borrow money for other needs, such as the acquisition or development of student housing properties and investments in military housing privatization projects.

We commenced operations through our operating partnership in 2004, have a limited history of operating and owning our student housing properties and military housing privatization projects, and therefore may have difficulty successfully and profitably operating our business.

We have only recently commenced operations through the acquisition of our student housing properties, investments in military housing privatization projects and agreements to manage student housing for others by our operating partnership in connection with our initial public offering in November 2004 and the related formation transactions at the time of our initial public offering. As a result,

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we have a limited operating history and limited experience in owning these student housing properties and operating these military housing privatization projects. Furthermore, we acquired our student housing properties and investments in military housing privatization projects we own as of December 31, 2006 primarily within the past two years and we have limited operating histories for the properties currently under management. Consequently, our historical operating results and the financial data set forth in this report may not be useful in assessing our likely future performance. We cannot assure you that we will be able to generate sufficient net income from operations to make distributions to our shareholders.

Historically, we have experienced rapid growth in our student housing and military housing businesses and may not be able to adapt our management and operational systems to respond to the acquisition and integration of these properties and investments in privatization projects, or to respond to new properties and projects that we acquire in the future, without unanticipated disruption or expense.

We acquired all of our student housing properties and investments in military housing privatization projects since July 2004 and expect to continue to acquire additional student housing properties and invest in military housing privatization projects going forward.

As a result of the rapid historical growth of our portfolio, we cannot assure you that we will be able to adapt our management, administrative, accounting and operational systems, or hire or retain sufficient operational staff to integrate these student housing properties and military housing privatization projects into our portfolio and manage any future acquisitions of additional student housing properties or military housing privatization projects without operating disruptions or unanticipated costs. Our failure to successfully integrate any future student housing property acquisitions, student housing property management contracts or military housing privatization projects into our portfolio could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our shareholders.

We expect our real estate investments to continue to be concentrated in student housing and military housing, making us more vulnerable to economic downturns in these housing markets than if our investments were diversified across several industry or property types.

We elected to be treated as a REIT for federal income tax purposes in connection with the filing of our tax return for the taxable year ended December 31, 2004, and we expect to continue to qualify as a REIT in the future. Accordingly, we will invest primarily in real estate. We intend to acquire, manage, and to a lesser extent, develop student housing properties, and to develop, construct, renovate and manage military housing properties. We are subject to risks inherent in concentrating investments in real estate. The risks resulting from a lack of diversification become even greater as a result of our business strategy to invest primarily in student and military housing properties. A downturn in the student or military housing markets could negatively affect our ability to lease our properties to new student residents and our ability to profitably operate our military housing privatization projects or obtain new privatization projects. These adverse effects could be more pronounced than if we diversified our investments outside of real estate or outside of the student and military housing markets.

If we are unable to successfully perform our obligations under our current student housing property management agreements and current military housing privatization projects, our ability to execute our business plan and our operating results could be adversely affected.

We cannot assure you that we will be able to successfully manage our student housing properties, or develop, construct, renovate and manage the military housing properties under our privatization projects, or that we will be able to perform our obligations under our current student housing property management agreements or military housing privatization projects. If we are unable to perform, we may be unable to

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execute our business plan, which could have a material adverse effect on our operating results and financial condition and our ability to make distributions to our shareholders.

We have agreed with Vornado Realty L.P. that our activities will satisfy certain requirements. If we are unable to satisfy these requirements we could be liable for substantial amounts.

In connection with the investment by affiliates of Vornado Realty L.P. in our operating partnership and the issuance of a warrant to Vornado Realty L.P., we and our operating partnership have agreed to certain restrictions regarding our activities and assets and the activities and assets of our operating partnership. If we breach any of these agreements, and, as a result, Vornado Realty L.P. fails to maintain its qualification as a REIT or otherwise incurs liability for any tax, penalty or similar charges, we and our operating partnership could be exposed to substantial liability for damages attributable to our breach.

We are subject to risks associated with the general development of housing properties, including those associated with construction, lease-up, financing, real estate tax exemptions, cost overruns and delays in obtaining necessary approvals, and the risk that we may be unable to meet schedule or performance requirements of our contracts.

We intend to continue to acquire, manage, and to a lesser extent, develop student housing properties, and to develop, construct, renovate and manage military housing properties under our privatization projects, in accordance with our business plan. We also engage in the development and construction of student housing properties. These activities may include the following risks:

·construction/renovation costs of a property may exceed original estimates, possibly making the development uneconomical;

·occupancy rates and rents at newly completed student housing properties or military housing properties may be insufficient to make the properties profitable to us or to provide sufficient cash flows to fund future development, construction or renovation periods;

·acceptable financing may not be available on favorable terms for development or acquisition of a property;

·leasing of a property may take longer than expected;

·development efforts may be abandoned;

·obtaining real estate tax exemptions acceptable to the DoD; and

·new construction may not be completed on schedule, resulting in increased debt service expense and development costs, delayed leasing and possible termination of our management contracts (particularly with respect to our military housing privatization projects).

In addition, any new development or management activities, regardless of whether or not they are ultimately successful, typically will require a substantial portion of the time and attention of our management. Development and management activities also are subject to risks relating to the inability to obtain, or delays in obtaining, the necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations.

The development and operation of real estate projects entails certain risks, including risks that costs of a project may exceed original estimates, and that the project will fail to conform to building plans, specifications and timetables, which may in turn be affected by strikes, weather, government regulations and other conditions beyond our control. In addition, we may become liable for injuries and accidents occurring on our properties and for environmental liabilities related to our property sites.

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Our management has limited prior experience operating a REIT or a public company. These limitations may impede the ability of our management to execute our business plan successfully and operate our business profitably.

Our management has limited prior experience in operating a REIT or in managing a publicly owned company, or managing growth at level that may occur in the future. We cannot assure you that the operating performance of our student housing properties and military housing privatization projects will not decline under our management. We may be unable to hire additional personnel on a timely basis. Therefore, you should be especially cautious in drawing conclusions about the ability of our management team to execute our business plan.

Specific Risks Related to Our Student Housing Business

Virtually all of our student housing leases, which typically have a 12-month lease term, become subject to renewal with existing student residents or lease-up with new student residents prior to the start of the academic year at colleges and universities. If we are unable to renew or lease-up our student housing properties prior to the start of the academic year, our chances of leasing these properties during subsequent months is reduced, and correspondingly, our rents and operating results will be adversely affected.

As a result of the student demand for rental housing during the several months prior to the beginning of the academic year at colleges and universities, which typically lasts from January through July, we generally lease our student housing properties to students under 12-month leases during this period. During this lease-up period, we typically will execute the majority of our leases for student housing units and therefore are dependent on the effectiveness of the marketing efforts of our on-site management teams. Because the terms of these leases will end at, or near the same time, we must re-lease the majority of our student housing units during this limited timeframe. If our marketing and leasing efforts are unsuccessful during this limited lease-up period, we may be unable to lease a substantial majority of our student housing units. Consequently, the failure to adequately market and lease-up our properties could have a material adverse effect on our operating results and financial condition.

We face significant competition from university-owned on-campus student housing, from other off-campus student housing properties and from traditional multi-family housing located near colleges and universities.

On-campus student housing has certain advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community. Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than we and other private owners and operators can.

Currently, the off-campus student housing industry is fragmented with no participant holding a significant market share. We also compete with national and regional owner-operators of off-campus student housing in a number of markets, as well as with smaller local owner-operators. Our properties often compete directly with a number of student housing complexes that are located near or in the same general vicinity of many of our properties. These competing student housing complexes may be newer than our properties, located closer to campus, charge less rent, possess more attractive amenities or offer more services or shorter terms or more flexible leases.

Rental income at a particular property could also be affected by a number of other factors, including the construction of new on-campus and off-campus residences, increases or decreases in the general levels of rents for housing in competing communities, increases or decreases in the number of students enrolled at one or more of the colleges or universities in the property’s market and other general economic conditions.

We believe that a number of other large national companies with substantial financial and marketing resources may be potential entrants in the student housing business. The entry of one or more of these companies could increase competition for students and for the acquisition, development and management of other student housing properties.

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Our student housing operations may be adversely affected by changing university admission and housing policies and our inability to maintain relationships with local colleges and universities.

A change in university admission policies could adversely affect our ability to lease our student housing properties. For example, if a university reduces the number of student admissions or requires that a certain class of students (e.g., freshmen) live in a university-owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline. We may be unable to modify our marketing efforts to compensate for a change in a college’s or university’s admission policy prior to the commencement of the annual lease-up period or any additional marketing efforts may be unsuccessful.

In addition, our ability to successfully lease our student housing properties depends on a number of factors, including maintaining good relationships with college and university communities (especially in connection with colleges and universities that refer students to us) and our continued ability to attract student residents to our properties. Many colleges and universities assist their students in the identification of attractive student-friendly off-campus housing through the distribution of off-campus property materials and the recommendation of college- and university-approved off-campus housing properties on their web sites. If colleges and universities change their policies on recommending off-campus student housing to their students, or cease distribution of off-campus student housing marketing materials to their students, our ability to attract student residents and to lease and collect rents on our student housing properties could be adversely affected. Consequently, the failure to maintain relationships with local colleges and universities could have a material adverse effect on our student housing business.

We may be unable to successfully acquire, develop and manage student housing properties on favorable terms.

Our future growth within the student housing business is dependent upon our ability to successfully acquire or develop new properties on favorable terms. As we acquire or develop additional properties, we will be subject to risks associated with managing new properties, including lease-up and integration risks. Newly-acquired properties may not perform as expected and may have characteristics or deficiencies unknown to us at the time of acquisition. During at least the first half of 2007, we may seek to acquire or develop new student housing properties solely through joint ventures with third parties. There can be no assurance that future acquisition and development opportunities will be available to us on terms that meet our investment criteria, that we will be able to identify suitable joint venture partners on terms acceptable to us, or that we will be successful in capitalizing on such opportunities. Our ability to capitalize on such opportunities will be largely dependent upon external sources of capital that may not be available to us on favorable terms, or at all.

Our ability to acquire properties on favorable terms and successfully operate them may expose us to the following significant risks:

·potential inability to acquire a desired property because of competition from other real estate investors;

·we may be unable to locate acceptable joint venture partners with whom we would negotiate to acquire and/or develop  the properties;

·competition from other potential acquirers may significantly increase a property’s purchase price;

·we may be unable to finance our equity portion of an acquisition on favorable terms or at all;

·we may have to incur significant capital expenditures to improve or renovate acquired properties;

·we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations;

·market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and

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·we may acquire properties subject to liabilities without any recourse, or with only limited recourse, to the sellers, or with liabilities that are unknown to us, such as liabilities for clean-up of undisclosed environmental contamination, claims by tenants, vendors or other persons dealing with the former owners of our properties and claims for indemnification by members, directors, officers and others indemnified by the former owners of our properties.

Our failure to finance property acquisitions on favorable terms, or operate acquired properties to meet our financial expectations, could adversely affect our financial condition and results of operations.

The lenders of certain non-recourse mortgage indebtedness that we assume or place on our properties could have recourse against us for the full amounts of their loans under certain circumstances.

As of December 31, 2006, we had $1,028.3 million in aggregate principal amount of mortgage debt secured by our properties. In general, mortgage debt is non-recourse to our subsidiary that owns the property and places the mortgage debt on the property, and will be non-recourse to us. However, the terms of each of the loans to which the mortgage debt relates include provisions that enable the lender to have recourse to the borrower generally if the borrower misrepresented certain facts or committed fraud. In addition, there are provisions under our current line of credit with Wachovia Bank, National Association that could result in an event of default to the extent we experience a material default under certain of our mortgage indebtedness relating to our properties. If one or more of the borrowers under our mortgage indebtedness exercises its rights to recourse against us for the full amount of the mortgage debt outstanding under their loans, our liquidity and financial condition could be adversely affected.

Specific Risks Related to our Military Housing Business

Certain military bases for which we own and operate a military housing privatization project have been approved for reduction of troops or closure under the Base Realignment and Closure, or BRAC, regulations. Our operating revenues from these projects and the value of our equity interest in the projects may be reduced, and our overall military housing segment revenues could be adversely affected with respect to the military bases under any of these military housing privatization projects.

As part of the DoD’s substantial reduction in the size of the U.S. military following the end of the Cold War, the federal government undertook four rounds of BRAC beginning in 1988, and again in 1991, 1993 and 1995. The fifth round of BRAC was initiated in 2004 and was completed on November 9, 2005, when, under current legislation, the final list of additional bases recommended for realignment or closure was approved by both President Bush and Congress. The BRAC law sets out a process that includes specific dates for government action and the creation of an independent commission appointed by the President. By way of background, the DoD released its initial recommendations for BRAC in May 2005, and the BRAC Commission then voted to amend the DoD’s initial list on July 19, 2005. Under the BRAC Commission’s revisions, several bases were removed from the DoD’s list of bases targeted for closure, including the Submarine Base in New London, Connecticut and the Portsmouth Naval Shipyard in Kittery, Maine, both of which are part of our Navy Northeast Region military housing privatization project. In addition, the BRAC Commission also proposed a less significant realignment at the Fort Eustis base under our Fort Eustis/Fort Story project in Newport News, Virginia than was proposed by the DoD. However, the BRAC Commission proposed to close the Naval Air Station in Brunswick, Maine, which had been recommended by the DoD to be realigned. Finally, the BRAC Commission voted to uphold the DoD’s recommendation to close the Walter Reed Army Medical Center in Washington, DC. In September 2005, President Bush accepted the BRAC Commission’s recommendations in their entirety. On November 9, 2005, the BRAC round was completed when Congress approved the BRAC Commission’s recommendations in their entirety.

Under the final BRAC list as compared to the original DoD recommendations, the possible number of affected military housing units covered by our existing projects was reduced from 2,500 to 700 units, which remaining 700 units are located at the Naval Air Station in Brunswick, Maine. We believe that the

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closure of the Walter Reed Army Medical Center will not result in the loss of housing units, as these housing units are likely to be utilized by personnel who will be relocated from serving at Walter Reed to serving at nearby military medical facilities.

If a base for which we maintain a privatization project is realigned or closed, our main source of tenants, members of the U.S. military and their families, will not continue to require housing at or near the base, resulting in a decreased rental revenue stream. This in turn may jeopardize our ability to collect future fees, and the value of our equity interest in the project could be adversely affected due to a reduction in its scope, to the extent that we are unable to re-lease any vacant units. The military housing privatization initiative had not been undertaken at the time of previous BRAC rounds, and therefore there is no historical information regarding the impact of a base closure on a military housing privatization project. To date, there has been no indication from the DoD or the BRAC Commission that the federal government has factored into its analysis the possible effects that a base closure or realignment resulting from BRAC could have with respect to the outstanding debt financing for a project. In addition, prior BRAC rounds have shown that even once a base is approved for closure or realignment, the actual closing or realignment of the base could take several years to be completed. Accordingly, management currently expects that the closure of the Naval Air Station in Brunswick, Maine will not occur for at least three years. We are unable to determine with any certainty, however, the specific impact, and the timing of any such impact, that base closures and realignments at our projects will have on our military housing operating results, other than the possible cessation or reduction of fees related to the affected bases.

In addition, it is inherent in the nature of military service that members of the military may be deployed and stationed away from a particular base for an extended period of time or permanently be reassigned to another base. As a result of such absences, dependents may move out of military housing facilities resulting in vacant housing units to be managed and re-leased by us. Typical military housing lease agreements, which have a one-year lease term and continue month-to-month thereafter, provide that a military resident may terminate a lease and be released from any further obligations under the lease upon receipt of orders requiring the resident to be deployed or temporarily or permanently stationed away from the base for more than 90 days by providing us with proof of orders and an appropriate letter from the resident’s commanding officer. If we are unable to re-lease these vacant units, the management fee revenue derived from the project’s rental revenues will decrease, and the project may be unable to be appropriately funded for construction and renovation of units throughout the term of the project. We also may be unable to receive any other fees that we may have otherwise earned under the project, and the projected, or any, return on our investment in the project. Any such effect could have an adverse effect on our financial condition and results of operations.

If there are significant numbers of base closures, force reductions or troop deployments that affect our existing military housing privatization projects, we may be unable to achieve the anticipated operating revenues to be derived from these projects and our results of operations may be adversely affected.

As a result of the anticipated closure of the Brunswick Naval Air Station covered by our Navy Northeast Region military housing privatization project, our joint venture with the Department of the Navy that owns the project must modify the terms of the project documents to amend various construction scope and timing requirements that were set prior to the BRAC announcement. Certain initial construction requirements under the original scope have not been met due to construction delays at bases slated for closure, and therefore the joint venture is currently in default under the terms of the trust indenture relating to the bonds issued to finance the project. The exercise of any default remedies by the bondholders relating to this project may adversely impact the operations of the project and our equity investment in the project.

As a result of the initial BRAC recommendations relating to the Submarine Base in New London, Connecticut, the Portsmouth Naval Shipyard in Kittery, Maine, and the Naval Air Station in Brunswick, Maine, each of which are included in our Navy Northeast Region project, our joint venture with the Navy

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that owns the project delayed construction of new housing units at these bases throughout 2005 and 2006. Once the final BRAC recommendations as approved by Congress removed the Submarine Base and Naval Shipyard from the closure list, the joint venture re-commenced construction at those two locations but has continued to delay construction at the Brunswick Naval Air Station. The project documents that were executed at the time of award of the project to our joint venture with the Navy did not provide for a reduced scope for the project in the event that bases under the project were targeted for reduction or closure. As a result, the project documents still contemplate that we will complete the original scope of project and contain covenants that require completion of construction of a certain number of housing units at each base included in the project by times that were agreed upon prior to the BRAC announcements. While we are currently working with the Navy to modify the project documents to reduce the scope of the project in light of the closure of the Brunswick Naval Air Station, the joint venture may be unable to complete the necessary amendments prior to the date that such construction scope and time requirements are required to be met and cured, and such inability to complete the necessary amendments in time could trigger a default under the project documents. In addition, due to the aforementioned construction delays, the joint venture was unable to meet a requirement to deliver a certain number of new construction housing units under the terms of the trust indenture that covers the bonds originally issued to finance the project. The joint venture was required to provide notice of this anticipated default to the bondholder representative and other related parties under the terms of the trust indenture, and did so in July 2006 and December 2006. As a result of this technical default, the trust indenture provides that a majority of the bondholders or the bond trustee can elect to declare all of the principal of, premium, if any, and interest on the bonds immediately due and payable. Such an acceleration of the bonds could result in the foreclosure on all or a portion of the project assets to the extent that the project’s available cash is insufficient to pay the bondholders in full. While the bonds are nonrecourse to us, to the extent that the bondholders are able to foreclose on all or a portion of the project, our future income stream from the project and our initial equity investment in the joint venture would be significantly or completely impaired. There also can be no guarantee that we will be able to complete amendments to the project documents and trust indenture needed to address the reduced scope of the project prior to the triggering of other events of default under the terms of such documents.

The joint ventures that own our military housing privatization projects have high leverage ratios which could cause us to lose cash flows and our investments in those projects if the joint ventures are unable to pay their debt service obligations.

Typically, up to 90% of the capitalization of the joint ventures that own our military housing privatization projects is debt, such as through the sale of taxable bonds to the public. These joint ventures generally are not required to be consolidated with our operations, and as a result this indebtedness is not reflected on our balance sheet. As a result of the high leverage ratios of these joint ventures, reductions in their revenues could impair their ability to service their debt. For example, if the BAH paid to members of the U.S. military is reduced, the personnel is reduced at the bases where our projects are located or these bases are closed, the revenue generated by these joint ventures could decrease. In addition, to the extent that any of our projects are restructured, resulting in a significant loss of end-state housing units covered by the project, the revenues generated by the project would be reduced and could materially impair the ability to make payments to bondholders for bonds issued in connection with the project’s financing. If any of the joint ventures covering our military housing privatization projects cannot service its indebtedness, we may not be paid with respect to certain projects on our development, construction, renovation and/or management fees, which would adversely affect our operating results. We also could lose our entire initial equity and any other additional investments in the project, which could adversely affect our financial condition.

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Our ability to earn development, construction/renovation and management fees, including related incentive fees, depends on the joint ventures that own our military housing privatization projects achieving specified operating milestones and thresholds.

The joint ventures that own our military housing privatization projects derive substantially all of their revenues from the BAH of their tenants. This revenue is then paid out by the joint ventures according to a distribution “waterfall” plan set forth in the joint ventures’ governing documents. Other than the standard management fee we earn, which is typically 2% to 3% of the BAH-related project revenues, and other disbursements, such as routine maintenance, utilities, taxes and insurance, no funds are available to be paid out to us until the joint ventures’ debt service obligations are satisfied. Thereafter, we only earn incentive management fees, preferential and other returns and on-going construction/renovation and development fees if the joint venture achieves operating milestones and thresholds specified in their governing documents, such as maintaining a certain number of end-state housing units online or completing the construction or renovation of a certain number of housing units by certain dates. Due to the inherent inability to predict possible delays in construction or renovation as a result of weather or unknown site conditions (such as environmental or structural concerns), our joint ventures with the military could experience construction/renovation delays that could impact the joint venture’s ability to meet deadlines or achieve operating milestones/thresholds. Our joint ventures have historically sought change orders in order to approve certain construction/renovation delays or approve additional draws needed to complete construction/renovation work relating to such delays. These change orders must be approved by the lenders associated with the financing of the project, and there can be no guarantee that the joint venture’s change orders will be approved in order to meet the operating milestones/thresholds under the project documents, or at all. Accordingly,  we cannot assure you that the joint ventures will achieve these operating milestones and thresholds, or that if the joint ventures achieve these milestones and thresholds, that funds will remain to pay incentive management fees, preferential and other returns and on-going construction/renovation and development fees. If the joint ventures fail to achieve these milestones and thresholds or, if funds are not available to pay incentive management fees, preferential and other returns and on-going construction/renovation and development fees, the operating results of our military housing business could fluctuate significantly over the course of the project and could suffer.

We rely on key partners and contractors in connection with the construction and development of our military housing privatization projects, and our inability to maintain these relationships or to engage new partners or subcontractors under commercially acceptable terms to us could impair our ability to successfully complete the construction and development of our military housing privatization projects and to obtain new military housing privatization projects.

We are dependent upon our relationships with partners and subcontractors in connection with the construction, renovation and development of our military housing privatization projects. Particularly, our management team has relationships with Centex Construction Company, LLC, The Benham Companies, LLC, and Phelps Development, LLC. Subject to the terms of our agreements with these construction, renovation and design partners and contractors, these parties provide services to those military housing privatization projects in which they are involved. To the extent that we are unable to maintain our relationships with these partners and contractors or to engage new partners and contractors under terms acceptable to us, our ability to complete a project in a timely fashion, or at a profit, may be impaired. If the amount we are required to pay for these services exceeds the amount we have estimated in bidding for military housing privatization projects or other fixed-price work, we could experience losses in the performance of these projects. In addition, if a partner or subcontractor was unable to deliver its services according to our negotiated terms with them for any reason, including the deterioration of its financial condition, another subcontractor would need to be obtained to perform the services, potentially at a higher price. This may result in the significant delay or additional costs associated with performance under our military housing privatization projects, the adverse effect on our operating results through a reduction in

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the profit to be realized, or the recognition of a loss on a project for which the services were needed. In addition, if we are unable to successfully manage the provision of services by our partners and contractors, we may not be awarded future military housing privatization projects.

We are subject to the risks associated with conducting business with the federal government, such as the government’s discontinuation of federal funding for some or all of its military housing privatization projects and the need to win new military housing privatization projects through a competitive bidding process.

We are subject to risks associated with conducting business with the federal government. The DoD, pursuant to its authority granted under the 1996 National Defense Authorization Act, has approved, as of March 9, 2007, the award of 78 military housing privatization projects to private owners, and the future award of an additional 41 projects. Any Congressional action to reduce budgetary spending by the DoD could limit the continued funding of these private-sector projects and could limit our ability to obtain additional privatization projects, which would have a material adverse effect on our business. The risks of conducting business with the federal government also include the risk of civil and criminal fines and the risk of public scrutiny of our performance at high profile sites.

In addition, privatization projects are currently awarded pursuant to a competitive bidding process, which differs procedurally with respect to each U.S. military branch. Generally, after a proposed site has been identified by a military branch for privatization, prospective companies must submit a proposal complying with specified guidelines demonstrating that the company will be able to successfully complete the project in accordance with the government requirements. The project winner is awarded the exclusive right to develop, construct, renovate and manage family housing at a military base throughout the duration of the ground lease, typically for a 50-year period. The competition pursuing privatization projects currently consists of a small, distinguished list of national and international developers, owners and operators of commercial and residential real estate. We cannot predict whether the number of companies that we compete against for the award of privatization projects will increase significantly in the future, or that we will be able to effectively compete against other private owners for projects awarded in the future.

The termination of the DoD’s authority to grant privatization projects, the reduction of government funding for such projects and our inability to effectively compete for the award of future projects could have a material adverse effect on our military housing business and, correspondingly, on our operating results and financial condition.

If Congress does not approve appropriations each year relating to the provision of the BAH paid to members of the U.S. military, which is the primary source of rental revenues under our military housing privatization projects, or if BAH were eliminated, our operating revenues and projected returns on investments from our military housing privatization projects would be significantly reduced.

Each year Congress must appropriate a budget for BAH for all of the branches of the U.S. military. We cannot assure you that such appropriations will be made in any given year, the appropriation each year will occur on a timely basis, or the amount of BAH appropriated will be sufficient to keep up with escalations in cost of living expenses. Moreover, we cannot assure you that the method of calculation, timing of payment, analysis of comparable market rents, cost of living increases or other issues affecting the amount and receipt of BAH by members of the U.S. military will not change from time to time, with possible material adverse consequences for the amount of operating revenues generated by our military housing privatization projects. The foregoing description of BAH is based on current law and DoD procedures. Congress can change the law and the DoD can revise its procedures at any time. We cannot assure you that such changes will not be made and, if changes are made, such changes may have a material adverse effect on the level of our operating revenues generated by our privatization projects.

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If we are unable to reach definitive agreements regarding the military housing privatization projects that are under exclusive negotiations with the U.S. military or as to which we are participating in a solicitation process, we would be unable to recover any costs incurred during the period of exclusivity or solicitation.

When we are initially selected for a military housing privatization project through the bidding process, we receive only the right to enter into exclusive negotiations with the applicable U.S. military branch, and the award of the project to us is subject to final approval from the U.S. military branch and Congress. During this exclusivity period, or during a pre-award solicitation period, each of which typically lasts between six months to one year, we will develop and present our plans to develop, construct, renovate and manage the project and may incur significant costs during this process. These costs include, among other things, surveyors, equipment, vehicles, on-site personnel salary and wages, inventory, and office and administrative set-up costs.

We cannot assure you that we will receive final approval from Congress on the award of any projects currently under exclusive negotiations or as to which we are participating in a solicitation process, or that the U.S. military branch will not decide to award the project to a competitor at the end of our exclusive negotiations or the solicitation process. If we do not receive final approval on the award of the project from the U.S. military branch or Congress, we may be unable to recover all of the costs that we have incurred during the exclusivity period or the solicitation process through our general military housing operations. Our failure to recover costs that we incur in connection with military housing privatization projects that are under exclusive negotiations or as to which we are participating in a solicitation process may cause the operating results of our military housing business to be adversely affected.

Risks Relating to Our Organization and Structure

Our Board of Trustees may authorize the issuance of additional shares that may cause dilution.

Our declaration of trust authorizes our Board of Trustees, without shareholder approval, to:

·amend the declaration of trust to increase or decrease the aggregate number of shares of beneficial interest or the number of shares of beneficial interest of any class that we have the authority to issue;

·authorize the issuance of additional common or preferred shares, or units of our operating partnership which may be convertible into common shares; and

·classify or reclassify any unissued common shares or preferred shares and to set the preferences, rights and other terms of such classified or reclassified shares, including preferred shares that have preference rights over the common shares with respect to dividends, liquidation, voting and other matters or common shares that have preference rights with respect to voting.

The issuance of additional shares could be substantially dilutive to our existing shareholders.

Our Board of Trustees may approve the issuance of a class or series of common or preferred shares with terms that may discourage a third party from acquiring us.

Our Board of Trustees may classify or reclassify any unissued common or preferred shares and establish the preferences and rights (including the right to vote, participate in earnings and convert into common shares) of any such shares. Therefore, our Board of Trustees could authorize the issuance of a class or series of common or preferred shares with terms and conditions which could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of the common shares might receive a premium for their shares over the then current market price of our common shares.

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Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit your recourse in the event of actions taken that are not in your best interests.

Our declaration of trust authorizes us and our bylaws require us to indemnify and advance expenses to our trustees and officers for actions taken by them in those capacities to the fullest extent permitted by Maryland law. In addition, our declaration of trust limits the liability of our trustees and officers for money damages, except for liability resulting from:

·actual receipt of an improper benefit or profit in money, property or services; or

·a final judgment based upon a finding of active and deliberate dishonesty by the trustee or officer that was material to the cause of action adjudicated.

As a result, we and our shareholders may have more limited rights against our trustees and officers than might otherwise exist.

Our ownership limitations may restrict business combination opportunities.

To qualify as a REIT under the Code, no more than 50% of our outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain types of entities) during the last half of each taxable year (other than our first REIT taxable year). Our declaration of trust prohibits, subject to certain exceptions, direct or indirect ownership (including by virtue of applicable constructive ownership rules) by any person of more than 7.1% of our outstanding common shares (as determined by reference to number or value, whichever is more restrictive), other than (i) Gary M. Holloway, Sr. and certain related persons, who are permitted in the aggregate to own up to 20% of the number or value of our outstanding common shares, whichever is more restrictive, (ii) Steven Roth and certain related persons, who are permitted in the aggregate to own up to 8.5% of the number or value of our common shares, whichever is more restrictive and (iii) Vornado Realty L.P., certain persons related to Vornado Realty L.P., certain of transferees or assignees of Vornado Realty L.P. or related persons and affiliates of such transferees or assignees, to which no ownership limit applies. Generally, common shares owned by affiliated owners will be aggregated for purposes of the ownership limitation. The definition of “person” in our declaration of trust is broader than the definition of “individual” that applies under the Code for purposes of the REIT qualification requirement that no more than 50% of our outstanding shares of beneficial interest be owned, directly or indirectly, by five or fewer individuals. As a result, our declaration of trust will prohibit share ownership in some circumstances where the ownership would not cause a violation of the REIT ownership requirement. Any transfer of our common shares that would violate the ownership limitation under our declaration of trust will be null and void, and the intended transferee will acquire no rights in such shares. Instead, such common shares will be designated as “shares-in-trust” and transferred automatically to a trust effective at the close of business on the day before the purported transfer of such shares. The beneficiary of a trust will be one or more charitable organizations named by us. The ownership limitation could have the effect of delaying, deterring or preventing a change in control or other transaction in which holders of common shares might receive a premium for their common shares over the then current market price or which such holders might believe to be otherwise in their best interests. The ownership limitation provisions also may make our common shares an unsuitable investment vehicle for any person seeking to obtain, either alone or with others as a group, ownership of more than 7.1% in number or value, whichever is more restrictive, of our outstanding common shares.

Our executive officers and certain of our trustees may experience conflicts of interest in connection with their ownership interests in our operating partnership.

Certain of our executive officers and trustees, including Gary M. Holloway, Sr., may experience conflicts of interest relating to their ownership interests in our operating partnership. With regard to ownership interests in our operating partnership, as of December 31, 2006, Mr. Holloway beneficially

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owned approximately 24.0% limited partnership interest in our operating partnership and our other executive officers, including Bruce F. Robinson, who is also one of our trustees, collectively owned  approximately 1.8% of the limited partnership interests in our operating partnership. Michael D. Fascitelli, also one of our trustees, is the president and a member of the Board of Trustees of Vornado Realty Trust, which, indirectly through its operating partnership and an affiliated entity, owned an aggregate of 7,337,857 units, or approximately 10.1% of the limited partnership interests in our operating partnership, and 2,517,247 of our common shares, or approximately 6.1% of GMH Communities Trust. Conflicts may arise as a result of these persons’ ownership interests in, or their affiliates’ interests in, our operating partnership to the extent that their interests as limited partners diverge from our interests, particularly with regard to transactions, such as sales of assets or the repayment of indebtedness, that could be in our best interests and our shareholders but may have adverse tax consequences to the limited partners in our operating partnership.

Gary M. Holloway, Sr. may have conflicts of interest as a result of his ownership of an entity that provides services to us, leases space from us.

Mr.  Holloway owns a 100% equity interest in GMH Capital Partners, LP, an entity that provides property management and real estate brokerage services for office, retail, industrial, multi-family and corporate properties as well as general contracting and construction management services and acquisition, disposition and development services. GMH Capital Partners, LP is not contractually prohibited from competing with us. In addition, GMH Capital Partners, LP leases space in our corporate headquarters, which we acquired in connection with our initial public offering. As a result of the ongoing ownership interests that Mr. Holloway owns in GMH Capital Partners, LP, there may be conflicts of interest with regard to the terms that we enter into pursuant to our lease to GMH Capital Partners, LP. In addition, we may engage GMH Capital Partners, LP to provide certain real estate brokerage services for us in the future.

Because Gary M. Holloway, Sr. owns a significant number of units in our limited partnership, he may be able to exert substantial influence on our management and operations, which may prevent us from taking actions that may be favorable to our shareholders.

As of December 31, 2006, Mr. Holloway beneficially owned approximately 24.0% of the outstanding units of limited partnership interest in our operating partnership. If the maximum number of units redeemable for our common shares by Mr. Holloway were actually redeemed, Mr. Holloway would beneficially own approximately 20.0% of our outstanding common shares. Although the terms of our declaration of trust limit Mr. Holloway’s ability to redeem his limited partnership interests to up to 20.0% of our outstanding common shares, such an ownership concentration of our shares may adversely affect the trading price of our common shares if investors perceive disadvantages to owning shares in companies with controlling shareholders. If we were to redeem the maximum number of Mr. Holloway’s units for common shares and Mr. Holloway were to retain those shares, he would have the ability to exert significant influence over all matters requiring approval of our shareholders, including the election and removal of trustees and any proposed merger, consolidation or sale of substantially all of our assets. In addition, he could influence significantly the management of our business and affairs. This concentration also could have the effect of delaying, deferring or preventing a change of control of us or impeding a merger or consolidation, takeover or other business combination that could be favorable to you. Further, Mr. Holloway’s concentration of ownership in our operating partnership affords him the ability to exert substantial influence over matters, such as a merger, consolidation or sale of substantially all of the assets of our operating partnership, all of which, under certain circumstances, require the consent of limited partners owning more than 50% of the partnership interest of the limited partners (other than those held by us or our subsidiaries).

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One of our trustees may have a conflict of interest as a result of his affiliation with Vornado Realty Trust, one of our largest shareholders on a fully-diluted basis.

Mr.  Fascitelli, one of our trustees, is the president and a member of the Board of Trustees of Vornado Realty Trust. As described elsewhere in this report, our operating partnership was initially formed in July 2004 through a joint venture between entities owned by Mr. Holloway and Vornado Realty L.P., the operating partnership of Vornado Realty Trust. In connection with our formation transaction, we issued a warrant to Vornado Realty L.P., under which Vornado has purchased 6,666,667 units of limited partnership in our operating partnership. On May 2, 2006, the expiration date under the warrant, Vornado received an additional 1,817,247 of our common shares through a net, or cashless, exercise feature of the warrant. Vornado also purchased 700,000 shares in our 2005 follow-on offering of common shares. Vornado CCA Gainesville, LLC, an affiliate of Vornado Realty L.P., also owns 671,190 units of limited partnership interest in our operating partnership, which were issued in connection with the contribution of an interest in a student housing property to our operating partnership at the time of our initial public offering. In addition, we are required to register for resale the common shares issuable upon exercise of the warrant and the other units currently held by Vornado CCA Gainesville, LLC. Under the terms of the warrant, Vornado has the right to designate for election to our Board of Trustees Mr. Fascitelli or such other officer of Vornado who is reasonably acceptable to us, so long as it holds common shares or units of limited partnership interest in our operating partnership acquired under the warrant at an aggregate price of not less than $10.0 million. Vornado exercised this right in August 2005, and Mr. Fascitelli was elected to serve on our Board of Trustees on August 10, 2005. As of result of the foregoing, Mr. Fascitelli could experience conflicts of interest between his duties to us and our shareholders and his duties to Vornado and its shareholders.

Some of our executive officers and trustees have other business interests that may hinder their ability to allocate sufficient time to the management of our operations, which could jeopardize our ability to execute our business plan.

Some of our executive officers and trustees have other business interests that may hinder their ability to spend adequate time on our business. Mr. Holloway retains 100% of the interests in GMH Capital Partners, LP, an entity that we did not acquire in our formation transactions, and several other entities relating to GMH Associates. GMH Capital Partners, LP provides various property management services and real estate brokerage services for office, retail, industrial, multi-family and corporate properties as well as construction management services and acquisition, disposition and development services. Mr. Holloway’s employment agreement permits him to continue to provide management and other services to this entity, and the provision of such services may reduce the time Mr. Holloway is able to devote to our business.

Maryland law may discourage a third party from acquiring us.

Maryland law provides broad discretion to our Board of Trustees with respect to its duties in considering a change in control of our company, including that our board is subject to no greater level of scrutiny in considering a change in control transaction than with respect to any other act by our Board.

The Maryland Business Combination Act restricts mergers and other business combinations between our company and an interested shareholder. An “interested shareholder” is defined as any person who is the beneficial owner of 10% or more of the voting power of our common shares and also includes any of our affiliates or associates that, at any time within the two year period prior to the date of a proposed merger or other business combination, was the beneficial owner of 10% or more of our voting power. A person is not an interested shareholder if, prior to the most recent time at which the person would otherwise have become an interested shareholder, our Board of Trustees approved the transaction which otherwise would have resulted in the person becoming an interested shareholder. For a period of five years

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after the most recent acquisition of shares by an interested shareholder, we may not engage in any merger or other business combination with that interested shareholder or any affiliate of that interested shareholder. After the five year period, any merger or other business combination must be approved by our Board of Trustees and by at least 80% of all the votes entitled to be cast by holders of outstanding voting shares and two-thirds of all the votes entitled to be cast by holders of outstanding voting shares other than the interested shareholder or any affiliate or associate of the interested shareholder unless, among other things, the shareholders (other than the interested shareholder) receive a minimum price for their common shares and the consideration received by those shareholders is in cash or in the same form as previously paid by the interested shareholder for its common shares. Our Board of Trustees has adopted a resolution, reflected in our bylaws, providing that we have opted out of the Maryland Business Combination Act. However, our Board of Trustees may opt at any time, without the approval of our shareholders, to make the statute applicable to us again. To the extent it applies, the business combination statute could have the effect of discouraging offers from third parties to acquire us and increasing the difficulty of successfully completing this type of offer.

Additionally, the “control shares” provisions of the MGCL are applicable to us as if we were a corporation. These provisions eliminate the voting rights of shares acquired in quantities so as to constitute “control shares,” as defined under the MGCL. Our bylaws provide that we are not bound by the control share acquisition statute. However, our Board of Trustees may opt to make the statute applicable to us at any time, and may do so on a retroactive basis.

We depend on the business relationships and experience of Gary M. Holloway, Sr. and our other executive officers, the loss of whom could threaten our ability to execute our strategies.

We depend on the services of Gary M. Holloway, Sr., our president, chief executive officer and chairman of our Board of Trustees, to carry out our business strategies. If Mr. Holloway were to leave the Company, it may be more difficult to locate attractive acquisition targets and manage the properties that we acquire. Additionally, as we expand, we will continue to need to attract and retain qualified additional senior executive officers. The loss of the services of any of our senior executive officers, or our inability to recruit and retain qualified personnel in the future, could have a material adverse effect on our business and financial results.

Certain of our executive officers have agreements that provide them with benefits in the event their employment is terminated by us without cause, by the executive for good reason, or under certain circumstances following a change of control of our company.

We have entered into employment agreements with each of our executive officers, including Gary M. Holloway, Sr., Bruce F. Robinson, John DeRiggi, Joseph M. Macchione and J. Patrick O’Grady that provide them with severance benefits if their employment is terminated by us without cause, by them for good reason (which includes, among other reasons, failure to be elected to the Board with respect to Mr. Holloway’s agreement, and any election by us not to renew our agreements with them), or under certain circumstances following a change of control of our company. Certain of these benefits, including the related tax indemnity with respect to the employment agreements for Mr. Holloway and Mr. Robinson, could prevent or deter a change of control of our company that might involve a premium price for our common shares or otherwise be in the best interest of our shareholders.

Our Board of Trustees may alter our investment policies at any time without shareholder approval, and the alteration of these policies may adversely affect our financial performance.

Our major policies, including our policies and practices with respect to investments, financing, growth, debt, capitalization, REIT qualification and distributions, are determined by our Board of Trustees. Our Board of Trustees may amend or revise these and other policies from time to time without a vote of our shareholders. Accordingly, our shareholders will have limited control over changes in our policies.

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We have set a targeted range for the amount of indebtedness that we incur from time to time. This target ratio may be amended or waived at any time without shareholder approval and without notice to our shareholders. In addition, our declaration of trust and bylaws do not limit the amount of indebtedness that we or our operating partnership may incur. If we become highly leveraged, then the resulting increase in debt service could adversely affect our ability to make payments on our outstanding indebtedness and harm our financial condition.

Through a wholly owned subsidiary, we are the sole general partner of our operating partnership, and, should the subsidiary be disregarded, we could become liable for the debts and other obligations of our operating partnership beyond the amount of our investment.

We are the sole general partner of our operating partnership, GMH Communities, LP, through our wholly owned subsidiary, GMH Communities GP Trust, a Delaware statutory trust, and we also owned units of limited partnership interest in our operating partnership equal to approximately 56.0% of the total partnership interests in our operating partnership as of December 31, 2006. If GMH Communities GP Trust were disregarded as the general partner, we would be liable for our operating partnership’s debts and other obligations. In such event, if our operating partnership is unable to pay its debts and other obligations, we will be liable for such debts and other obligations beyond the amount of our investment in our operating partnership. These obligations could include unforeseen contingent liabilities.

Risks Relating to Real Estate Investments

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our targeted properties and harm our financial condition.

Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our student housing properties or military housing privatization projects in response to changes in economic and other conditions will be limited. No assurances can be given that we will recognize full value for any property that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations.

Our targeted properties may not achieve forecasted results or we may be limited in our ability to finance future acquisitions, which may harm our financial condition and operating results, and we may not be able to make the distributions required to maintain our REIT status.

Acquisitions and developments entail risks that the properties will fail to perform in accordance with expectations and that estimates of the costs of improvements necessary to acquire, develop and manage properties will prove inaccurate, as well as general investment risks associated with any new real estate investment. We anticipate that acquisitions and developments will largely be financed through externally generated funds such as borrowings under credit facilities and other secured and unsecured debt financing and from issuances of equity securities. Because we must distribute at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and by excluding any net capital gain, each year to maintain our qualification as a REIT, our ability to rely upon income from operations or cash flow from operations to finance our growth and acquisition activities will be limited. Accordingly, if we are unable to obtain funds from borrowings or the capital markets to finance our acquisition and development activities, our ability to grow would likely be curtailed, amounts available for distribution to shareholders could be adversely affected and we could be required to reduce distributions, thereby jeopardizing our ability to maintain our status as a REIT.

Newly-developed or newly-renovated properties do not have the operating history that would allow our management to make objective pricing decisions in acquiring these properties. The purchase prices of these properties will be based in part upon projections by management as to the expected operating results of such properties, subjecting us to risks that these properties may not achieve anticipated operating results

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or may not achieve these results within anticipated time frames. In addition, we have witnessed a compression of capitalization rates for the student housing properties that we are targeting under our investment criteria. During 2006, capitalization rates declined, and may continue to decline in the future. We, therefore, may be unable to purchase student housing properties at attractive capitalization rates.

If we suffer losses that are not covered by insurance or that are in excess of our insurance coverage limits, we could lose investment capital and anticipated profits.

We have general liability insurance that provides coverage for bodily injury and property damage to third parties resulting from our ownership of the properties that are leased to, and occupied by, our residents. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes, wars and acts of terrorism that may be uninsurable or not insurable at a price we can afford. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impracticable to use insurance proceeds to replace a property after it has been damaged or destroyed. Under these circumstances, the insurance proceeds we receive might not be adequate to restore our economic position with respect to the affected property. If any of these or similar events occur, it may reduce our return from the property and the value of our investment.

Capital expenditures for property renovations may be greater than forecasted and may adversely impact rental payments by our residents and our ability to make distributions to shareholders.

Properties, particularly those that consist of older structures, have an ongoing need for renovations and other capital improvements, including periodic replacement of furniture, fixtures and equipment. Renovation of properties involves certain risks, including the possibility of environmental problems, construction cost overruns and delays, uncertainties as to market demand or deterioration in market demand after commencement of renovation and the emergence of unanticipated competition from other properties. All of these factors could adversely impact rental payments by our residents, have a material adverse effect on our financial condition and results of operations, and adversely affect our ability to make distributions to our shareholders.

All of our student housing properties are subject to property taxes, and some of our military housing properties may be subject to property taxes. If these taxes were to be significantly increased by applicable authorities in the future, our operating results and ability to make distributions to our shareholders would be adversely affected.

Our student housing properties are subject to real and personal property taxes, and some of our military housing properties may be subject to real and personal property taxes, that may increase as property tax rates change and as the properties are assessed or reassessed by taxing authorities. As the owner of the student housing properties and a member of or partner in the joint venture entity that owns the military housing privatization projects that cover military housing properties, we will be responsible, in whole or in part, for payment of the taxes to the government. Increases in property tax rates may adversely affect our operating results and our ability to make expected distributions to our shareholders.

Our performance and the value of our common shares will be affected by risks associated with the real estate industry.

Our ability to make expected dividend payments to our shareholders and the value of our common shares depend largely on our ability to generate cash revenues in excess of expenses, debt obligations and capital expenditure requirements. Factors that may adversely affect our ability to generate cash revenues include:

·changes in the national, regional and local economic climate;

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·rising interest rates;

·local conditions such as an oversupply of, or a reduction in demand for, student and military housing;

·increased operating costs, including insurance premiums, utilities and real estate taxes;

·attractiveness of our properties to residents;

·costs of complying with changes in governmental regulations; and

·competition from other real estate developers of student housing and companies pursuing the award of future military housing privatization projects.

In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases, which would adversely affect us.

As the owner and lessor of real estate, we are subject to risks under environmental laws, the cost of compliance with which, and any violation of which, could materially adversely affect us.

Our operating expenses could be higher than anticipated due to the cost of complying with existing and future environmental and occupational health and safety laws and regulations. Various environmental laws may impose liability on a current or prior owner or operator of real property for removal or redemption of hazardous or toxic substances. Current or prior owners or operators may also be liable for government fines and damages for injuries to persons, natural resources and adjacent property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence or disposal of the hazardous or toxic substances. The cost of complying with environmental laws could materially adversely affect amounts available for distribution to our shareholders and could exceed the value of all of our properties. In addition, the presence of hazardous or toxic substances, or the failure of our residents to properly dispose of or remediate such substances, may adversely affect our residents or our ability to use, sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our revenue and our financing ability. We intend to obtain Phase I environmental assessments on any properties we acquire, manage or develop. However, even if the Phase I environmental reports do not reveal any material environmental contamination, it is possible that material environmental liabilities may exist of which we are unaware.

Although the leases for our student housing properties generally will require our student residents to comply with laws and regulations governing their operations, and to indemnify us for certain environmental liabilities that they create, the scope of their obligations may be limited. We cannot assure you that our student residents or their guarantors will be able to fulfill their indemnification obligations. In addition, environmental and occupational health and safety laws constantly are evolving, and changes in laws, regulations or policies, or changes in interpretations of the foregoing, could create liabilities where none exists today.

With regard to our military housing properties, the federal government will not indemnify us for any environmental liability on these properties. As a result, we may be exposed to substantial liability to remove or remediate hazardous or toxic substances, which could materially adversely affect our financial condition and results of operation.

Future terrorist attacks in the U.S. could harm the demand for and the value of our properties.

Future terrorist attacks in the U.S., such as the attacks that occurred on September 11, 2001, and other acts of terrorism or war, or threats of the same, could diminish the demand for and the value of our properties. The military bases at which we have privatization projects may be terrorist targets. Also, certain

49

of our properties are near universities which contain well-known landmarks and may be perceived as more likely terrorist targets than similar, less recognizable properties. A decrease in demand in our markets would make it difficult for us to renew or re-lease our properties at lease rates equal to or above historical rates.

Terrorist attacks also could directly impact the value of our properties through damage, destruction, loss, or increased security costs, and the availability of insurance for such acts may be limited or may cost more. If we receive casualty proceeds, we may not be able to reinvest such proceeds profitably or at all, and we may be forced to recognize taxable gain on the affected property.

We may incur significant costs complying with the Americans with Disabilities Act and similar laws.

Under the Americans with Disabilities Act of 1990, or ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties. For example, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990, to be accessible to the handicapped. We have not conducted an audit or investigation of all of our properties to determine our compliance. Noncompliance with the ADA or FHAA could result in the imposition of fines or an award or damages to private litigants and also could result in an order to correct any non-complying feature. We cannot predict the ultimate amount of the cost of compliance with the ADA, FHAA or any other legislation. If we incur substantial costs to comply with the ADA, FHAA or any other legislation, we could be materially and adversely affected.

We may incur significant costs complying with other regulations.

The properties in our portfolio are subject to various other federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these various requirements, we might incur governmental fines or private damage awards. If we are not in compliance with existing requirements, or if existing requirements change, we may have to make significant unanticipated expenditures that would materially and adversely affect us.

Risks Relating to Our Common Shares

The market price and trading volume of our common shares may be volatile in the future.

The market price of our common shares may be highly volatile and subject to wide fluctuations in the future. The stock market has experienced extreme price and volume fluctuations that have affected the market price of many companies in industries similar or related to ours and that have been unrelated to these companies’ operating performances. These broad market fluctuations could reduce the market price of our common shares. Furthermore, our operating results and prospects may be below the expectations of public market analysts and investors or may be lower than those of companies with comparable market capitalizations, which could lead to a material decline in the market price of our common shares. In addition, the trading volume in our common shares may fluctuate and cause significant price variations to occur.

We cannot assure you that the market price of our common shares will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common shares include:

·the likelihood that an active market for our common shares will continue;

·actual or anticipated variations in our operating results;

·changes in our funds from operations or earnings estimates;

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·publication of research reports about us or the real estate industry;

·increases in market interest rates may lead purchasers of our common shares to demand a higher dividend rate which, if our distributions do not rise, will mean our share price will fall;

·changes in market valuations of similar companies;

·adverse market reaction to any increased indebtedness we incur in the future;

·additions or departures of key management personnel;

·actions by institutional shareholders;

·speculation in the press or investment community;

·general market and economic conditions; and

·future offerings of debt securities or preferred shares, which would be senior to our common shares upon liquidation, and additional offerings of equity securities, which would dilute our existing shareholders and may be senior to our common shares for the purposes of dividend distributions, may adversely affect the market price of our common shares.

In the future, we may attempt to increase our capital resources by making offerings of debt or additional offerings of equity securities, including commercial paper, medium-term notes, senior or subordinated notes and series of preferred shares or common shares. Upon our liquidation, holders of our debt securities and preferred shares and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common shares. Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common shares, or both. Our preferred shares, if issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to make a dividend distribution to the holders of our common shares. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common shares bear the risk of our future offerings reducing the market price of our common shares and diluting their share holdings in us.

Common shares eligible for future sale may have adverse effects on our share price.

We cannot predict the effect, if any, of future sales of common shares or the availability of shares for future sales, on the market price of our common shares. We are required to register for resale up to 34,141,864 shares, which are either currently held by Vornado Realty L.P. as a result of its exercise of a warrant or which shares may be received by various persons and entities upon redemption of units of limited partnership interest in our operating partnership. We expect to file a registration statement covering the resale of these shares as soon as possible after the filing of this Annual Report on Form 10-K. Sales of substantial amounts of common shares, or the perception that these sales could occur, may adversely affect prevailing market prices for our common shares. Under the terms of our operating partnership agreement, the common shares eligible for issuance upon redemption of units of limited partnership interest in our operating partnership, including units that we may issue to third parties in the future, are required to be registered within nine months following the date of initial issuance of such units. In addition, we filed a registration statement with respect to the 2,000,000 common shares authorized for issuance under our Equity Incentive Plan in connection with the grant of restricted common share awards, option grants or other equity-based awards authorized by the Compensation Committee of our Board of Trustees. We also may issue from time to time additional common shares or units of limited partnership interest in our operating partnership in connection with the acquisition of properties and we may grant additional demand or piggyback registration rights in connection with these issuances. Sales of substantial amounts of common shares or the perception that these sales could occur may adversely effect the prevailing market

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price for our common shares. In addition, the sale of these shares could impair our ability to raise capital through a sale of additional equity securities.

The market value of our common shares could decrease based on our performance and market perception and conditions.

The market value of our common shares may be based primarily upon the market’s perception of our growth potential and current and future cash dividends, and may be secondarily based upon the market value of our underlying assets. We expect the market price of our common shares to be influenced by the dividend on our common shares relative to market interest rates. Rising interest rates may lead potential buyers of our common shares to expect a higher dividend rate, which would adversely affect the market price of our common shares. In addition, rising interest rates would result in increased interest expense on our variable rate debt and adversely affect cash flow and our ability to service our indebtedness and make distributions to our shareholders.

Tax Risks Associated with Our Status as a REIT

If we fail to qualify for or lose our tax status as a REIT, we would be subject to significant adverse consequences and the value of our common shares may decline.

We intend to continue to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes under the Code. We elected to be taxed as a REIT upon the filing of our tax return for the taxable year ended December 31, 2004. Our qualification as a REIT depends, and will continue to depend, on our ability to meet various requirements concerning, among other things, the ownership of our outstanding common shares, the nature of our assets, the sources of our income and the amount of our distributions to our shareholders. The REIT qualification requirements are extremely complex, and the interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, there is no assurance that we will be successful in operating so as to qualify as a REIT. At any time, new laws, regulations, interpretations or court decisions may change the federal tax laws relating to, or the federal income tax consequences of, qualification as a REIT. It is possible that future economic, market, legal, tax or other considerations may cause our Board of Trustees to revoke the REIT election, which it may do without shareholder approval.

If we revoke, lose or fail to achieve our REIT status, we will face serious tax consequences that will substantially reduce the funds available for distribution because:

·we would not be allowed a deduction for distributions to shareholders in computing our taxable income;

·we would be subject to federal income tax at regular corporate rates, and we might need to borrow money or sell assets in order to pay any such tax;

·we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and

·unless we are entitled to relief under statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify.

In addition, if we fail to qualify as a REIT, we will not be required to pay dividends to shareholders, and all dividends to shareholders will be subject to tax to the extent of our current and accumulated earnings and profits. As a result of all of these factors, a failure to achieve, or a loss or revocation of our REIT status could have a material adverse effect on our financial condition and results of operations and would adversely affect the value of our common shares.

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In addition, in circumstances where we fail to qualify as a REIT, it is likely that we will also have failed to comply with the restrictions on our activities and those of the operating partnership that we agreed to with Vornado Realty L.P., in which case we would also be liable for any damages incurred by Vornado Realty L.P., certain of its affiliates and its transferees and assignees, together with certain of their affiliates, as a result of such failure.

To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.

In order to maintain our qualification as a REIT, we are required under the Code to distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we will be compelled to rely on third party sources to fund our capital needs. We may not be able to obtain this financing on favorable terms or at all. Any additional indebtedness that we incur will increase our leverage. Our access to third party sources of capital depends, in part, on:

·general market conditions;

·our current debt levels and the number of properties subject to encumbrances;

·our current performance and the market’s perception of our growth potential;

·our cash flow and cash dividends; and

·the price of our common shares.

If we cannot obtain capital from third party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our debt service obligations or make the cash dividends to our shareholders necessary to maintain our qualification as a REIT.

Failure to make required distributions would subject us to tax.

In order to qualify as a REIT, each year we must distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends-paid deduction and by excluding any net capital gain. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of:

·85% of our ordinary income for that year;

·95% of our capital gain net income for that year; and

·100% of our undistributed taxable income from prior years.

We intend to pay out our income to our shareholders in a manner that satisfies the distribution requirement and avoids corporate income tax and the 4% nondeductible excise tax. We may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require us to borrow money or sell assets to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax in a particular year. In the future, we may borrow to pay distributions to our shareholders and the limited partners of our operating partnership. Any funds that we borrow would subject us to interest rate and other market risks.

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Complying with REIT requirements may cause us to forgo otherwise attractive opportunities.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our shares. As a result, we may be required to forgo attractive business or investment opportunities in order to meet these tests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or you as a shareholder. Effective for taxable years beginning after December 31, 2002, the Jobs and Growth Tax Relief Reconciliation Act of 2003, which we refer to as the Jobs and Growth Tax Act, generally reduces the maximum rate of tax applicable to most domestic noncorporate taxpayers on dividend income from regular C corporations to 15%. This reduces substantially the so-called “double taxation” (that is, taxation at both the corporate and shareholder levels) that has generally applied to corporations that are not taxed as REITs. Generally, dividends from REITs will not qualify for the dividend tax reduction because, as a result of the dividends paid deduction to which REITs are entitled, REITs generally do not pay corporate level tax on income that they distribute to shareholders. The implementation of the Jobs and Growth Tax Act may cause domestic noncorporate investors to view stocks of non-REIT corporations as more attractive relative to shares of REITs than was the case previously. We cannot predict what impact this legislation may have on the value of our common shares.

The income earned by our taxable REIT subsidiaries will be subject to federal income tax.

We own active taxable REIT subsidiaries that earn income that, if earned by us outside of a taxable REIT subsidiary, would jeopardize our status as a REIT. For example, our taxable REIT subsidiaries earn fees from developing, constructing, renovating and managing military housing properties and providing management services to certain third party owners of student housing, as well as fees for providing certain noncustomary services for our student housing properties, that would not be qualifying income for purposes of the REIT income tests. A taxable REIT subsidiary is taxed as a regular C corporation. The income from the activities described above and other income earned by our taxable REIT subsidiaries is therefore subject to a corporate level tax, notwithstanding that we qualify as a REIT.

We may not conduct all of our third party student housing management business through a taxable REIT subsidiary, which could jeopardize our ability to comply with one of the REIT gross income requirements.

In general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% REIT gross income test, other types of interest and dividends, gain from the sale or disposition of shares or securities, or any combination of these. Fees that we earn from providing property management services to third party owners of student housing properties do not constitute qualifying income for purposes of the 95% REIT gross income test. We conduct all (or as nearly all as possible) of our third party student housing property management business through a taxable REIT subsidiary. The fees we earn from that business other than through a taxable REIT subsidiary, together with all other income that does not constitute qualifying income under the 95% gross income test, cannot exceed 5% of our total gross income. If we fail to manage our business in a manner that allows us to satisfy the 95% REIT gross income test, the portion of income associated with the amount in excess of this 95% threshold would be taxed at 100%, and we could lose our REIT qualification which would, among other

54

things, cause all of our earnings to be subject to federal income tax and would reduce our cash available for distributions to shareholders.

To maintain our REIT status, we will be required to comply with a number of requirements relating to the relative values of our assets, and we may be required to limit activities conducted through a taxable REIT subsidiary.

As a REIT we will be required to satisfy, as of the close of each quarter of each of our taxable years, a number of requirements relating to the relative values of our assets, including requirements that not more than 25% of the value of our total assets be represented by assets other than real estate assets, cash and cash items and government securities and that not more than 20% of the value of our total assets be represented by securities of taxable REIT subsidiaries. We intend to monitor our compliance with the various asset test requirements. As a number of these requirements are based on value, however, it is possible that the IRS could successfully argue for a value of our nonqualifying assets that was such that we would fail to satisfy a REIT asset requirement. In such circumstances, we could fail to qualify as a REIT for the taxable year of such failure and the following four taxable years.

To maintain our status as a REIT, no more than 20% of the value of our total assets may consist of the securities of our taxable REIT subsidiaries, such as GMH Military Housing, LLC and College Park Management TRS, Inc. Certain of our activities, such as development, construction, renovation, and management services, must be conducted through a taxable REIT subsidiary in order for us to maintain our REIT status. In addition, certain non-customary services generally must be provided by a taxable REIT subsidiary or an independent contractor from which we do not derive any income. If the revenues from such activities create a risk that the value of our interest in our taxable REIT subsidiaries, based on revenues or otherwise, approach the 20% threshold, we will be forced, in order to maintain our REIT status, to curtail such activities or take other steps to remain under the 20% threshold. Since our formation transactions, the development, construction, renovation, and management services provided to our military housing privatization projects and the management services provided to certain third party owners of student housing have been conducted through taxable REIT subsidiaries. Consequently, income earned by these taxable REIT subsidiaries is subject to corporate income tax.

We may be subject to tax if our taxable REIT subsidiaries provide services to our tenants other than on an arm’s length basis.

If our taxable REIT subsidiaries provide services to our tenants for other than an arm’s length charge (payable from the tenants or from us), we would be subject to a 100% tax on the difference between the amount in fact derived by the taxable REIT subsidiary and the arm’s length charge. In addition, if our taxable REIT subsidiaries pay more than an arm’s length charge to our operating partnership, GMH Communities Trust or any of their affiliates for services or overhead provided to the taxable REIT subsidiaries, we would be subject to a 100% tax on the difference between the amount in fact paid by the taxable REIT subsidiary and the arm’s length charge.

Item 1B. Unresolved Staff Comments

None.

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Item 2.Properties.

Properties we own.   The 77 student housing properties that we owned or had ownership interests in as of December 31, 2006 consisted of 14,432 units containing 46,696 beds that were located near 51 colleges and universities in 27 states, and had an average occupancy level of 94.4%. The following table presents information regarding the 77 student housing properties, and six undeveloped parcels of land and one partially developed parcel of land that we owned or had ownership interests in as of December 31, 2006:

Property Name	Year Built/Renovated		Primary University Served	Occupancy Rate(1)			Number of Units(1)		Number of Beds(1)		Revenues(2)
Abbott Place		1999	Michigan State University		98.3	%		222		654		$	802
Aztec Corner		1997/2001/2005	San Diego University		97.3			179		600		1,550
Blanton Commons		2005	Valdosta State University		89.9			204		596		3,222
Brookstone Village		1994	University of North Carolina—Wilmington		98.3			124		238		877
Burbank Commons		1999	Louisiana State University		100.0			134		532		562
Cambridge at Southern		2006	Georgia Southern University		99.3			228		564		394
Campus Club—Gainesville(3)		1997	University of Florida		93.0			252		924		4,493
Campus Club—Statesboro		2003	Georgia Southern University		84.6			276		984		4,882
Campus Commons(3)		1991/1993	University of Oregon		97.0			252		696		726
Campus Connection(4)		1998	University of Illinois—Urbana Champaign		88.0			270		864		4,166
Campus Connection—Phase II(4)		N/A	University of Illinois—Urbana Champaign		N/A			N/A		N/A		N/A
Campus Corner		1994	Indiana University		98.4			252		792		1,067
Campus Ridge Apartments(5)		2000	East Tennessee State University		97.9			132		528		1,900
Campus Ridge Apartments—Phase II(5)		N/A	East Tennessee State University		N/A			N/A		N/A		N/A
Campus Trails		1997	Mississippi State University		100.0			156		480		391
Campus Walk		2001	University of Mississippi		98.8			108		432		1,964
Campus Walk—UNCW		1990	University of North Carolina—Wilmington		99.7			289		290		1,578
Campus Way		1998	University of Alabama		99.4			192		676		767
Chapel Ridge		2003	University of North Carolina—Chapel Hill		86.2			180		544		3,375
Chapel View		1986	University of North Carolina—Chapel Hill		98.0			224		358		1,831
Collegiate Hall		2001	University of Alabama—Birmingham		81.1			176		528		2,211
Fields(3)		1999	University of Illinois—Urbana Champaign		97.4			192		588		2,916
GrandMarc at Seven Corners		2000	University of Minnesota		100.0			186		440		4,057
GrandMarc at University Village		2001	University of California—Riverside		69.3			212		824		5,504
Hawk’s Landing		1996	Miami University of Ohio		95.2			122		484		691
Huntsville Land(6)		N/A	Sam Houston State University		N/A			N/A		N/A		N/A
Jacob Heights		2004	Minnesota State University—Mankato		96.9			42		162		831
Jacob Heights III		2006	Minnesota State University—Mankato		100.0			24		96		203
Lakeside		1991	University of Georgia		90.9			242		772		708
Lincoln View		1994/1999	University of Illinois—Urbana Champaign		97.8			254		732		664
Lion’s Crossing		1996	Pennsylvania State University		99.7			204		696		2,910
Nittany Crossing		1996	Pennsylvania State University		100.0			204		684		3,348
Orchard Trails(7)		2006	University of Maine—Orono		89.4			144		576		—		(7)
Pegasus Connection		2000	University of Central Florida		99.4			312		930		6,408
Pirate’s Cove		2000	East Carolina University		75.8			264		1,056		4,356
Riverside Estates		1995	University of South Carolina		98.4			206		700		788
Seminole Suites(3)		2004	Florida State University—Tallahassee		95.7			264		924		5,253
South View Apartments		1996-1998	James Madison University		100.0			240		960		4,343
Stadium Suites		2004	University of South Carolina		99.9			264		924		3,620
State College Park		1991	Pennsylvania State University		99.9			196		752		3,459
Stone Gate Apartments		1999-2000	James Madison University		99.9			168		672		3,126
The Centre		2004	Western Michigan University		92.0			232		700		3,057
The Club		1989/2001	University of Georgia		99.0			120		480		1,662
The Commons		1991	James Madison University		97.9			132		528		2,153
The Commons on Oak Tree		1995	University of Oklahoma		76.5			254		780		2,389
The Courtyards		1993	University of Kentucky		83.6			182		676		703
The Edge I(3)		1998	University of North Carolina—Charlotte		100.0			96		384		1,911
The Edge II(3)		1999	University of North Carolina—Charlotte		100.0			84		336		1,579
The Enclave		2002	Bowling Green State University		86.3			120		480		1,748
The Enclave—Phase II(7)		2006	Bowling Green State University		76.6			144		576		—		(7)
The Highlands		2004	University of Nevada—Reno		94.4			216		732		3,363
The Ridge(3)		2002	West Virginia University		100.0			168		644		2,988
The Summit		2003	Minnesota State University—Mankato		99.4			192		672		3,532

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The Towers at Third	1973	University of Illinois—Urbana Champaign	98.0	%	147	295	$	2,941
The Verge	2004	California State University—Sacramento	67.7		288	792	4,301
The View	2003	University of Nebraska	77.0		156	588	1,666
University Court	2001	Michigan State University	94.0		138	516	2,178
University Crescent	1999	Louisiana State University	97.4		192	660	3,185
University Crossing(3)	1997	University of Kansas	98.1		229	700	2,685
University Crossings	1929/2003	Drexel University and University of Pennsylvania	99.9		260	1,026	6,146
University Edge(3)	2003	University of Southern Mississippi	97.6		156	552	2,863
University Estates	2001	Ball State University	91.8		144	552	1,672
University Gables	2001	Middle Tennessee State University	96.1		180	648	2,649
University Glades(3)	2000	University of Florida	99.1		120	432	2,188
University Greens	1999	University of Oklahoma	90.7		156	516	1,958
University Heights(3)	1999	University of Tennessee	96.7		204	636	2,865
University Lodge	2002	University of Wyoming	86.5		121	481	1,978
University Manor	2002	East Carolina University	92.5		168	600	2,701
University Meadows	2001	Central Michigan University	95.9		184	616	2,310
University Mills	2002	Northern Iowa University	99.6		121	481	1,903
University Oaks	2004	University of South Carolina	100.0		181	662	3,617
University Pines	2001	Georgia Southern University	97.1		144	552	2,664
University Place	2003	University of Virginia	92.0		144	528	2,153
University Pointe	2004	Texas Tech University	97.4		204	682	3,534
University Trails	2003	Texas Tech University	99.4		240	684	3,159
University Village	1979/2006	California State Sacramento	94.2		250	394	1,915
University Walk(3)	2002	University of North Carolina - Charlotte	99.6		120	480	2,618
Uptown(3)	2004	North Texas University	98.1		180	528	3,296
Willow Tree Apartments	1967-1968	University of Michigan	98.6		312	572	3,218
Willow Tree Towers	1974	University of Michigan	100.0		163	283	1,494
Totals					14,432	46,696	$	188,885

(1)As of December 31, 2006.

(2)For properties acquired during 2006, revenues consist of rent and other property income for the period from the date of our acquisition of the property through December 31, 2006.

(3)As of March 15, 2007, this property was under a non-binding letter of intent for sale or to be placed into a joint venture with a third party institutional investor. We currently expect the sales and joint venture process to be completed during the second quarter of 2007.

(4)Campus Connection (formerly referred to by us as Melrose Apartments—Phase I) consists of a land parcel containing an existing student housing building that is contiguous to a 13.1 acre, undeveloped parcel of land. The undeveloped parcel of land is referred to as Campus Connection—Phase II (formerly referred to by us as Melrose Apartments—Phase II). When developed, Campus Connection—Phase II is expected to contain 168 units and 534 beds.

(5)Campus Ridge Apartments consists of a land parcel containing an existing student housing building that is contiguous to a 6.1-acre partially-developed parcel of land. This partially-developed parcel is referred to as Campus Ridge Apartments—Phase II. When developed, Campus Ridge Apartments—Phase II is expected to contain 72 units and 288 beds.

(6)Consists of five contiguous land parcels, totaling approximately 26 acres. We currently plan to construct a 23-building student housing community that upon completion will contain 318 units and 894 beds.

(7)Orchard Trails consists of 144 units and 576 beds, and The Enclave—Phase II consists of 144 units and 576 beds. Construction on both properties began in August 2005 was completed in August 2006. We contributed land to the joint venture in exchange for a 10% interest and cash. We have an option to purchase our joint venture partner’s interest in the joint venture within one year after completion of the student housing properties and we also provide certain guarantees on the outstanding loan amounts. Our ownership interest in this joint venture is accounted for as a financing arrangement, whereby we record the real estate as an asset, depreciate the property, and record a financing obligation. Accordingly, we are not presenting annual revenues for these properties.

In addition to the student housing properties that we owned as of December 31, 2006, as listed above, on January 26, 2007, we acquired a 50.1-acre land parcel located adjacent to The View, a currently-owned student housing property located in Lincoln, Nebraska and serving the University of Nebraska.

Properties we have under contract and a non-binding letter of intent.   As of March 15, 2007, we had agreements to purchase one additional student housing property containing a total of 72 units and 264 beds, and 13 undeveloped parcels of land for the development of one future student housing property. We also, as of March 15, 2007, had entered into a non-binding letter of intent to (i) sell seven student housing properties, and (ii) enter into a joint venture with a third party institutional investor that would cover six of our currently-owned student housing properties. These transactions are subject to certain conditions, and we provide no assurance that we will be successful in completing the transactions under the terms currently outlined our letters of intent, or at all.

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Properties we manage for others.   We manage each of the student properties we own. As of December 31, 2006, we also managed 18 student housing properties owned by others, containing a total of 3,053 units and 9,900 beds, including 51 units and 279 beds that are currently under construction. We manage these student housing properties owned by others through one of our taxable REIT subsidiaries. The following table presents information regarding the student housing properties that we managed for others as of December 31, 2006:

Property Name	Year Built	Primary University Served	Occupancy Rate(1)	Number of Units(1)	Number of Beds(1)
2040 Lofts	2006	University of Wisconsin at Milwaukee	55.7%	132	377
Blanton Common Phase II(2)	2006	Valdosta State	81.4	72	264
Campus Connection	2000	University of North Carolina at    Charlotte	91.1	158	576
Campus Pointe at EIU	2005	Eastern Illinois University	66.1	120	336
Campus Pointe at WKU	2005	Western Kentucky University	76.6	132	372
Nittany Pointe	2000	Pennsylvania State University—    Altoona	97.8	156	624
Magnolia Park	2006	Georgia State University	79.7	136	444
Pegasus Landing	1999	University of Central Florida	96.7	744	2,532
Pegasus Pointe	1999	University of Central Florida	96.5	432	1,224
Presbyterian House(3)	N/A	University of Wisconsin	N/A	51	279
Scott Residence Hall & Conference    Center	2000	University of Nebraska—Omaha	100.0	50	168
Scott Village	2003	University of Nebraska–Omaha	99.4	120	480
The Artists’ Residence	2001	Massachusetts College of Art	100.0	90	310
The Village at West Chester	2004	West Chester University	99.6	131	524
University Courtyard	1999	Florida A&M University	80.0	96	384
University Hall at West Chester	2004	West Chester University	100.0	88	265
University Towers	1996	San Diego State University	99.7	290	570
Westminster - North and South	1923/1926- 1927	University of California at Berkeley	93.6	55	171
Total				3,053	9,900

(1)As of December 31, 2006.

(2)We are currently under contract to acquire this property within 30 days after the earlier of (i) the date the property becomes 95% occupied, or (ii) August 1, 2007.

(3)Presbyterian House consists of a student housing property that is currently under construction and, when completed, is expected to contain 51 units and 279 beds. The property is expected to be completed in August 2007. We are currently providing pre-leasing services with respect to this property.

Our corporate headquarters and other leased space.   We own our corporate headquarters building, which is located in Newtown Square, Pennsylvania and consists of approximately 44,721 square feet of administrative offices. As of December 31, 2006, we leased approximately 7,682 square feet of our headquarters building to several entities affiliated with Gary M. Holloway, Sr. We believe that our current facilities are adequate for our present purposes.

Item 3.Legal Proceedings.

On April 5, 2006, the Company, Gary M. Holloway Sr., our Chairman, President and Chief Executive Officer, and Bradley W. Harris, our former Chief Financial Officer, were named as defendants in a class action complaint filed in United States District Court for the Eastern District of Pennsylvania, or the Court. The complaint provides that the Plaintiff has filed a federal class action on behalf of purchasers of the publicly traded securities of the Company between October 28, 2004 and March 10, 2006, referred to as the Class Period, seeking to pursue remedies under the Securities Act of 1933 and the Securities Exchange Act of 1934. Plaintiff alleges that defendants issued a series of false and misleading financial results

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regarding the Company to the market during the Class Period, and more specifically, failed to disclose: (1) that the Company’s earnings, net income and revenues were materially inflated and expenses were materially understated; (2) that the Company’s funds from operations were materially inflated; (3) that the Company lacked adequate internal controls; (4) that the Company’s reported financial results were in violation of generally accepted accounting principles, or GAAP; and (5) that as a result of the foregoing, the Company’s financial results were materially inflated at all relevant times. Plaintiff alleges claims under Section 11 of the Securities Act with respect to all of the defendants; Section 12(a)(2) of the Securities Act with respect to the Company; Section 15 of the Securities Act with respect to Mr. Holloway and Mr. Harris; Section 10(b) and Rule 10b-5 of the Exchange Act with respect to all of the defendants; and Section 20(a) of the Exchange Act with respect to Mr. Holloway and Mr. Harris.

On April 11, 2006, April 20, 2006, April 27, 2006 and May 15, 2006, four additional class action complaints were filed with the Court against the defendants by separate law firms, and the Company anticipates that additional complaints may be filed in the near future until a class has been certified by the Court. Each of these additional filed complaints alleges the same claims against the defendants as described above with respect to the complaint filed on April 5, 2006, except that the complaint filed on April 20, 2006 restricts the class period to purchasers of the publicly traded securities of the Company to the time period between May 5, 2005 and March 10, 2006.

On January 22, 2007, the court entered an order appointing two lead plaintiffs, as well as lead counsel and a liaison counsel. In addition, on that date, the court entered an order indicating that the lead plaintiffs shall file a consolidated complaint within 60 days of the date of the order and that defendants shall respond to the consolidated complaint within 60 days of service of such consolidated complaint. This order also stated that the parties shall not file any dispositive motions before attending a settlement conference with an assigned magistrate judge. Accordingly, the defendants do not expect to file a dispositive motion, such as a motion to dismiss the action, until a consolidated complaint has been filed and a settlement conference has occurred. The outcome of this litigation is uncertain, and while the Company believes that it has valid defenses to Plaintiff’s claims and intends to defend the class action lawsuit vigorously, no assurance can be given as to the outcome of this litigation. An adverse outcome could have a material adverse effect on our financial condition and results of operations.

In addition, on March 12, 2007, the sellers of a portfolio of student housing properties that we acquired in June 2005, and who received units of limited partnership interests in our operating partnership in connection with the transaction, have filed a lawsuit against the Company for securities fraud relating to our sale of the partnership interests. The sellers have alleged similar claims to those asserted in our pending class action litigation described above, including that we provided false and misleading financial results in connection with the offer and sale of the partnership interests. In connection with the acquisition of the portfolio, we purchased four student housing properties in exchange for a combination of cash, assumption of debt and the issuance of 1,940,282 units of limited partnership interests in our operating partnership valued at a total of approximately $76.8 million. The units of limited partnership interest were issued for a total value of approximately $27.5 million or $14.17 per unit of limited partnership interest. The outcome of this litigation is uncertain; and while we believe we have valid defenses to the claims and will defend ourselves vigorously, no assurance can be given as to the outcome of this litigation. An adverse outcome could have a material adverse effect on our financial condition and results of operations.

The Company also is subject to routine litigation, claims and administrative proceedings arising in the ordinary course of business. Other than the matters described above, we are not involved in any other material litigation nor, to our knowledge, is any material litigation pending or threatened against us.

Item 4.Submission of Matters to a Vote of Security Holders.

We did not submit any matters to the vote of security holders during the fourth quarter of our fiscal year ended December 31, 2006.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common shares are traded on the New York Stock Exchange under the symbol “GCT.” Our common shares commenced trading on October 28, 2004. The following table sets forth, for the indicated periods, the high and low sales prices of our common shares as quoted on the New York Stock Exchange and the dividends we have paid to our shareholders.

	Price Range of Common Shares				Dividend Paid
	High		Low		Per Share
Fiscal year ended December 31, 2005:
First Quarter	$	14.00	$	11.30		$	0.2275
Second Quarter	$	14.59	$	11.34		$	0.2275
Third Quarter	$	15.65	$	13.64		$	0.2275
Fourth Quarter	$	15.89	$	14.10		$	0.2275
Fiscal year ended December 31, 2006:
First Quarter	$	17.10	$	10.80		$	0.2275
Second Quarter	$	13.18	$	10.75		$	0.2275
Third Quarter	$	13.73	$	11.80		$	0.2275
Fourth Quarter	$	14.18	$	10.04		$	0.1650	(1)

(1)Declared on December 18, 2006 and paid on February 1, 2007 to shareholders of record as of the close of business on December 29, 2006.

On December 31, 2006, the last reported sale price of our common shares on the New York Stock Exchange was $10.15.

On December 31, 2006, there were approximately 27 holders of record of our common shares. This number does not include shareholders whose shares are held of record by a brokerage house or clearing agency, but does include any such brokerage house or clearing agency as one record holder.

We intend to pay regular quarterly distributions to our shareholders. Federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income determined without regard to the dividends-paid deduction and excluding any net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income, including capital gains. We anticipate that our estimated cash available for distribution will exceed the annual distribution requirements applicable to REITs. However, under some circumstances, we may be required to pay distributions in excess of cash available for distribution in order to meet these distribution requirements and we may need to borrow funds to pay some distributions.

Our ability to fund these distributions will depend, in part, upon cash flow from our student housing properties, our management contracts regarding student housing properties owned by others, from management, construction/renovation and development fees and preferred equity returns under our military housing privatization projects, and the continued successful leasing of our student housing portfolio and the acquisition of additional student housing properties and military housing privatization projects. The timing and amount of our anticipated cash flows is inherently uncertain. To the extent these sources are insufficient, we may seek to lower our distributions or borrow funds for distributions from our line of credit, as we have done with respect to the dividends we have paid since the completion of our initial public offering. Availability under our current line of credit is limited. As of December 31, 2006, we had approximately $50.6 million in available funds remaining from our $250 million line of credit. Under

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the terms of the line of credit, the lender pre-approved only the following uses of borrowings: (i) to acquire or fund certain pending student housing acquisitions and military housing projects that have been pre-approved by the lender and (ii) to fund the third and fourth quarter distribution, and other general working capital advances pursuant to the terms of the agreement. The use of the line of credit for any other purpose must be approved by the lender in its sole and absolute discretion. Accordingly, the lender may not approve the use of funds from the line of credit for quarterly dividend distributions to shareholders after the payment of the dividend relating to the fourth quarter of 2006. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” In addition, the line of credit contains affirmative and negative covenants and also contains financial covenants which, among other things, require that we maintain (i) a fixed charge coverage ratio with respect to the student housing properties, as defined in the line of credit, of at least 1.25 to 1.00, (ii) a consolidated tangible net worth, as defined by the line of credit agreement, of at least $455 million, (iii) maintain quarterly minimum aggregate adjusted management EBITDA relating to the military housing segment and student housing managed properties, as defined in the line of credit agreement, of $5.0 million, and (iv) our federal tax status as a REIT.

Distributions made by us will be authorized and determined by our Board of Trustees out of funds legally available therefore and will be dependent upon a number of factors, including restrictions under applicable law or contained in our debt instruments or agreements or in terms of any future preferred shares. Since our initial public offering, our distributions have exceeded our then current and accumulated earnings and profits as determined for federal income tax purposes due to non-cash expenses, primarily depreciation and amortization charges that we have incurred, and we expect them to continue to do so in the near term. Therefore, a portion of these distributions will represent a return of capital for federal income tax purposes. Distributions in excess of our current and accumulated earnings and profits and not treated by us as a dividend will not be taxable to a taxable U.S. shareholder under current federal income tax law to the extent those distributions do not exceed the shareholder’s adjusted tax basis in his or her common shares, but rather will reduce the adjusted basis of the common shares. Therefore, the gain (or loss) recognized on the sale of the common shares or upon our liquidation will be increased (or decreased) accordingly. To the extent those distributions exceed a taxable U.S. shareholder’s adjusted tax basis in his or her common shares, they generally will be treated as a capital gain realized from the taxable disposition of those shares.

Approximately 95% of our distributions for the year ending December 31, 2006 represented a return of capital for federal income tax purposes. With respect to our dividend distribution of $0.165 per common share for the fourth quarter of 2006, this dividend will be included in our distributions for 2007 due to the fact that it was paid on February 1, 2007. To the extent not inconsistent with maintaining our REIT status, we may retain accumulated earnings of our taxable REIT subsidiaries in such subsidiary. The percentage of our shareholder distributions that exceeds our current and accumulated earnings and profits may vary substantially from year to year.

For the period from October 28, 2004 through December 31, 2004, we declared and paid our initial partial quarterly dividend of $0.16 per common share. At the same time, our operating partnership paid an equivalent distribution of $0.16 per unit to holders of limited partnership interests in our operating partnership. With respect to this distribution, $0.109319 of the $0.16 per common share represented a return of capital for federal income tax purposes. During the fiscal year 2005, and through the third quarter of 2006, we declared and paid quarterly dividends of $0.2275 per common share, and our operating partnership paid an equivalent distribution of $0.2275 per unit to holders of limited partnership interests in our operating partnership. In addition, on December 18, 2006, we declared a dividend of $0.165 per common share to shareholders of record as of the close of business on December 29, 2006, that was paid on February 1, 2007. With respect to distributions paid to shareholders during the fiscal year 2005, approximately 59% of our distributions represented a return of capital for federal income tax purposes.

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As noted above, we lowered our quarterly distribution to shareholders for the fourth quarter of 2006 from historical levels. Prior to this decrease, we had historically paid a distribution of $0.91 per year. We cannot assure you that we will continue to have cash available for distributions at historical levels or at all. Any distributions we pay in the future will depend upon our actual results of operations, economic conditions and other factors that could differ materially from our current expectations. Our actual results of operations will be affected by a number of factors, including the revenue we receive from our student housing properties, revenues from management and consulting fees in connection with management services that we will provide for student housing properties owned by others, revenues from our military housing privatization projects, our operating expenses, interest expense and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, see “Risk Factors.”

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Item 6.   Selected Financial Data.

	For the Year Ended December 31,
	Company								Predecessor Entities
	2006			2005		2004(1)			2003			2002
	(in thousands, except per share data)
Operating Data:
Revenue
Rental revenue	$	189,041		$	132,094	$	25,650		$	636		$	736
Operating expense reimbursements	70,243			62,580		40,512			10,591			3,711
Fee income:
Related parties	8,481			7,005		4,355			3,892			6,578
Third parties	3,167			3,774		3,986			2,624			1,983
Other fee income—related party	21,635			18,321		8,460			842			372
Other income	564			378		915			230			295
Total revenue	293,131			224,152		83,878			18,815			13,675
Expenses:
Property operating expenses	87,845			57,619		21,188			9,218			7,799
Reimbursed expenses	70,243			62,580		40,512			10,591			3,711
Real estate taxes	18,010			12,191		1,887			83			79
Administrative expenses	17,682			12,254		6,006			1,405			295
Audit Committee and Special Committee expenses	7,821			—		—			—			—
Profits interest and employee initial public offering bonus expense	—			—		37,502			—			—
Depreciation and amortization	43,830			34,188		7,154			822			821
Interest	55,333			31,025		6,072			396			542
Total expenses	300,764			209,857		120,321			22,515			13,247
(Loss) income before equity in earnings of unconsolidated entities, minority interest, and income taxes	(7,633		)	14,295		(36,443		)	(3,700		)	428
Equity in earnings of unconsolidated entities	3,523			3,073		—			751			—
(Loss) income before minority interest and income taxes	(4,110		)	17,368		(36,443		)	(2,949		)	428
Income taxes	4,733			5,580		312			—			—
(Loss) income before minority interest	(8,843		)	11,788		(36,755		)	(2,949		)	428
Minority interest	(3,857		)	5,729		247			—			—
Net (loss) income	$	(4,986	)	$	6,059	$	(37,002	)	$	(2,949	)	$	428
Basic earnings per share	($0.12		)	$	0.19	$	0.01	(2)
Diluted earnings per share	($0.12		)	$	0.18	$	0.01	(2)

(1)The results of operations for the year ended December 31, 2004 reflect the results of operations of the GMH Predecessor Entities for the period from January 1, 2004 through November 1, 2004, and the results of operations for the Company, after completion of our initial public offering, for the period from November 2, 2004 through December 31, 2004.

(2)Basic and diluted earnings per share reflect our operations for the period November 2, 2004 (the date of the closing of the Company’s initial public offering) to December 31, 2004. Net income for this period was $251 (in thousands).

	As of December 31,
	Company						Predecessor Entities
	2006		2005		2004		2003		2002
	(in thousands)
Balance Sheet Data
Real estate investments, net	$	1,592,567	$	1,181,216	$	634,730	$	—	$	—
Corporate office, net	8,425		7,613		11,384		6,963		7,100
Cash and cash equivalents	22,539		2,240		60,926		515		96
Total assets	1,713,990		1,277,951		773,061		16,146		13,536
Mortgage notes payable and line of credit	1,227,725		728,069		370,007		10,977		11,806
Total liabilities	1,298,718		792,452		395,242		12,552		13,099
Minority interest	157,972		188,633		182,118		—		—
Equity	257,300		296,866		195,701		3,594		437

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

GMH Communities Trust commenced operations on November 2, 2004, upon completion of our initial public offering and the simultaneous acquisition of the sole general partnership interest in GMH Communities, LP, referred to throughout this report as our operating partnership. The historical operations prior to completion of our initial public offering that are described in this report refer to the operations of College Park Management, Inc., GMH Military Housing, LLC, 353 Associates, L.P., and Corporate Flight Services, LLC, which are collectively referred to, together with our operating partnership, as the GMH Predecessor Entities or our predecessor entities.

In connection with our formation transactions completed prior to and simultaneously with the completion of our initial public offering, the ownership interests in the GMH Predecessor Entities were contributed to our operating partnership as described in Note 1 of the financial statements included in this report. We have described our operations in this report as if the historical operations of our predecessor entities were conducted by us for the full fiscal year ended December 31, 2004.

Overview

We are a self-advised, self-managed, specialty housing company that focuses on providing housing to college and university students residing off-campus and to members of the U.S. military and their families. As of December 31, 2006, we owned, or had ownership interests in, 77 student housing properties containing a total of 14,432 units and 46,696 beds and seven  undeveloped or partially developed parcels of land held for development as student housing properties. In addition, we managed a total of 18 student housing properties owned by others, containing a total of 3,053 units and 9,900, as well as 51 units and 279 beds currently under construction. Additionally, as of December 31, 2006, our operating partnership had an ownership interest in, and through various wholly-owned subsidiaries operated, nine military housing privatization projects, comprising an aggregate of 17,489 end-state housing units on 21 military bases. Through our taxable REIT subsidiaries, we provide development, construction, renovation and management services to our military housing privatization projects (other than our AETC Group I project), and property management services to student housing properties owned by others. In addition, throughout 2006, we provided consulting services with respect to the management of certain student housing properties owned by others, including colleges, universities, and other private owners. In order to comply with the applicable requirements under the REIT provisions of the Code, we must limit the operations of taxable REIT subsidiaries so that securities issued to us by our taxable REIT subsidiaries do not represent more than 20% of our total assets as of the close of any quarter in our taxable year and so that dividends from our taxable REIT subsidiaries, together with our other non-qualifying gross income, do not exceed 25% of our gross income for any taxable year.

Currently, our operations are managed within three operating segments that are separately reported: (1) student housing owned properties  (2) student housing management, and (3) military housing. This structure provides an effective platform for maximizing market penetration and optimizing operating economies of scale. In addition, we separately report the activities of certain departments from a corporate level, which includes personnel that service GMH Communities Trust as a whole and support our overall operations.

2007 Business Strategy

In December 2006, we announced that our management expected to implement a business strategy beginning in 2007 that would involve the sale, refinancing and/or entrance into a joint venture covering a number of our currently-owned student housing properties. The proceeds from these transactions will be used to repay outstanding indebtedness under our line of credit with Wachovia Bank, which has an initial maturity date of June 1, 2007. In connection with this business strategy, we completed the refinancing of four of our currently-owned student housing properties in February 2007, for a total of $90.0 million in

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new 10-year mortgage debt at a fixed interest rate of 5.6%. We used the net proceeds from this refinancing to repay $73.6 million in outstanding borrowings under our line of credit, which resulted in the replacement of the indebtedness under the line of credit that was carrying a variable LIBOR-based interest rate of 7.32% as of the date of the refinancing. Immediately following this transaction, we had approximately $138.0 million in remaining borrowings outstanding under our line of credit.

As of the date of this report, we had executed letters of intent to sell seven of our currently-owned student housing properties, as well as a non-binding letter of intent with a third party institutional investor to form a joint venture that will cover an additional six of our currently-owned student housing properties. For more information on our properties that are subject to these letters of intent, see Item 2 of this report titled “Properties.” Although these transactions were still in the due diligence phase as of the date of this report, and we have not executed binding agreements, we currently expect to complete them during the second quarter of 2007. The proceeds from these transactions also will be used to repay outstanding indebtedness under our line of credit. Based on the terms provided under these letters of intent, we expect to receive a sufficient amount of net proceeds from these transactions to pay down the remainder of our outstanding indebtedness under our line of credit.

Student Housing—Owned Properties

The student housing owned properties segment reflects the revenues and expenses of off-campus student housing properties acquired and owned through the REIT ownership structure which are strategically located near college or university campuses. During the years ended December 31, 2004, 2005 and 2006, our rental revenue increased substantially as a result of the acquisition of an aggregate of 75 properties (excluding two properties in which we have a 10% interest together with a joint venture partner). During the year ended December 31, 2006, we acquired 21 of these properties. Additionally, operating expenses, real estate taxes and depreciation and amortization have increased as a result of these acquisitions. Further, interest expense has increased related to the financing of the properties we have acquired.

Historically, we have found certain property revenues and operating expenses to be cyclical in nature, and therefore not incurred ratably over the course of the year. As our properties are leased predominantly on an academic-year basis, certain of our operating revenues and expenses will vary from quarter to quarter depending on the leasing cycle. For example, we experience significant turnover costs commencing towards the end of the second quarter and more significantly during the third quarter of our fiscal year, in connection with preparing our properties for new residents prior to commencement of the new academic-year lease period, which typically begins in August or September. In addition, we also typically incur higher lease-up costs during the first two quarters of our fiscal year, as this is the period during which we heavily target students for leases that will commence for the next academic year. Property revenues and expenses may differ from expected results in the year of acquisition, depending on the timing of the acquisition in relation to the leasing cycle. In comparing our operating statistics for the fiscal year 2006 versus 2005, most of the key operating metrics, such as rent and other property income, depreciation and amortization, interest expense and property operating expense, for the student housing owned properties segment experienced significant increases, primarily as a result of (i) the presentation of a full year of operations during 2006 with respect to properties acquired in 2005, and (ii) the acquisition of an additional 21 properties during 2006. The increase in real estate taxes was disproportionately higher than the increase in rent and other property income due to more aggressive assessments by local taxing authorities with respect to certain of our student housing properties throughout 2005 and 2006. The increase in property operating expenses was disproportionately higher than the increase in rent and other property income due primarily to increased utility expense. During 2006, we also experienced, and expect to continue to experience, increases in operating expenses (in addition to the proportionate increase associated with the increased

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number of properties owned in 2006 versus 2005) that will include increased utility expenses resulting from national trends in higher energy-related costs.

Until we are able to successfully execute our 2007 business strategy to repay indebtedness under our current line of credit as outlined above under “2007 Business Strategy,” we expect to place less emphasis on the acquisition of additional student housing properties, and to continue to focus on the operational performance of our existing student housing properties and development projects. After we complete this business strategy, and to the extent we are able to obtain a new long-term line of credit, we may determine that it is appropriate to place greater emphasis on the acquisition of additional student housing properties that are located in our targeted markets and that meet management’s underwriting criteria for creating long-term growth potential. To the extent that we seek to acquire student housing properties during at least the first half of 2007, we will consider funding the acquisition through joint venture structures similar to the joint venture terms that we entered into with respect to our Orono, Maine and Bowling Green, Ohio development properties. The timing of any additional acquisitions or development projects will be dependent upon various factors, including the ability to complete satisfactory due diligence, to find suitable joint venture partners and agree upon mutually acceptable joint venture terms, to obtain appropriate debt financing on the properties, and the availability of capital. We would consider funding our equity portion of any joint ventures by using funds from available cash from operations or borrowings. We may also determine that it is appropriate to purchase additional student housing properties outright, as opposed to with a joint venture partner, depending upon many factors which may include, but are not limited to, the applicable purchase price, available capital, and projected returns with respect to the property.

Student Housing—Management

The student housing management segment provides the on-site management function for, and generally oversees the management of, all off-campus student housing properties for the Company and for properties we manage that are owned by third parties. Third parties may be related parties or parties unaffiliated with the Company. The properties are strategically located near college or university campuses. Total revenues from management activities, including reimbursement of expenses, increased by approximately 22% from 2006 to 2005, including management fees earned from the properties managed for the Company.

We earn management fees from managing properties for third parties. These fees are typically equal to a percentage of cash receipts or gross rental revenues generated by the managed properties, or equal to a fixed monthly amount, according to the management agreements for the properties we manage. We also have the ability to earn incentive management fees by achieving specified property-level performance criteria for certain properties we manage for third parties. Further, certain operating expenses incurred related to properties we manage for others are reimbursed by the owners of the properties managed. We expect to continue generating fee revenue and operating expense reimbursements from the properties that we manage for others, although the amounts are expected to become less significant as a percentage of our overall revenues as rental income increases from the properties we own. During 2007, we expect to continue to pursue new third-party management agreements by utilizing relationships in the student housing market and providing our significant operational economies of scale as a savings mechanism for other third-party owners, including institutional owners and individual student housing owners.  However, we expect management fees to contribute less significantly as a percentage of overall revenue in future periods, as a result of the continued growth in rental revenue that we expect to generate from the operations of properties we own and from the full year of operations of properties that we acquired during 2006.

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Military Housing

Our military housing segment develops, constructs, renovates and manages military housing privatization projects in which we acquire equity interests. Our military housing segment began generating revenue in the fourth quarter of 2003 with the initiation of our Fort Carson and Fort Stewart/Hunter projects. Revenue grew throughout 2004, 2005, and 2006 with the addition of various other projects. Revenue from our military housing segment is comprised primarily of fee income for providing development, construction/renovation and management services to our military housing privatization projects. In addition, we also are entitled to returns on the equity we invest in the projects. In addition, we earn business development fees from certain of our business partners in connection with our military housing privatization projects, such as our construction and architectural/engineering partners. We seek these fees as payment for our business development efforts incurred by us in connection with pursuing and coordinating the completion of military housing privatization projects that benefit these business partners. We also receive expense reimbursements, consisting primarily of payroll and related expenses, closing costs and transition costs we incur for the project in the periods preceding the initiation of our management of the project. Typically, at the time we initiate management on a project, the project reimburses us for these amounts from the proceeds of the debt securities issued by the military housing privatization project.

As of December 31, 2006, we owned equity interests in the joint ventures that owned the nine military housing privatization projects in operation, encompassing 21 military bases totaling 17,489 housing units. During the year ended December 31, 2006, we earned fees for providing development, construction/renovation and management services to these nine military housing privatization projects.

On May 1, 2006, we closed on the formal award of our Fort Gordon project with the Army and officially commenced operations of this project. The project has a six-year initial development period with new construction and renovations of 887 end-state housing units. The 50-year project term involves the development, management and construction of high-quality homes, the targeted renovation of existing homes, and the addition of community enhancing facilities and services. Also on May 1, 2006, we acquired an ownership interest in our Carlisle/Picatinny project and began management and maintenance services for this project. As of July 21, 2006, financing was secured for the project, and construction/renovation activities have commenced. This 50-year project has a five-year initial development period with new construction and/or renovation of 348 end-state housing units.

On October 23, 2006, we announced that we had been chosen by the Department of the Army to design, construct and manage two single soldier housing projects, located at Fort Bliss and Fort Stewart. These two projects are among the first of unaccompanied housing privatization awards targeted by the Army.

In November 2006, we announced completion of a refinancing for the Fort Carson project in order to obtain additional project funding for the development and construction/renovation of an additional 396 new housing units. This expansion project has an initial development period of four years, and as with the original scope of the project, we will earn fees relating to the new construction of these additional housing units, in addition to the fees we currently earn for managing the existing housing units.

In addition, on February 6, 2007, we closed on our AETC Group I project with the Department of the Air Force, a military housing privatization project covering four bases and 2,875 end-state housing units. The AETC Group I project represents our first military housing project with the Department of the Air Force.

Also, on February 26, 2007, we announced that we were selected by the Department of the Navy to enter into exclusive negotiations for the design, construction, management and maintenance of the military family housing at 11 Southeast Region Navy bases in five states. The 50-year term of the Navy Southeast project is expected to commence with a six-year initial development period, or IDP, that is valued in excess

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of $700 million and covering approximately 5,501 end-state housing units. On March 8, 2007, we also announced that we were selected by the Department of the Army to enter into exclusive negotiations for the family housing privatization project at the U.S. Military Academy at West Point, New York, which is expected to have a five-year IDP with project costs valued in excess of $160 million.

With regard to trends and uncertainties in the military housing market see the section of this report titled “Risk Factors—Specific Risks Related to our Military Housing Business.” Our management team also had under review, as of March 9, 2007, six potential additional military housing privatization project opportunities, and will continue to pursue opportunities to acquire projects or project rights from our competitors, as well as opportunities to participate in pilot housing programs for unaccompanied military personnel. For additional details with respect to these projects see the section titled “Military Housing Business—Additional Military Housing Privatization Projects and Development Opportunities under Review” located in Part I, Item 1 of this report.

Critical Accounting Policies

Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses the Company’s consolidated financial statements and the GMH Predecessor Entities’ combined financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. While the estimates and judgments associated with the application of these accounting principles may be affected by different assumptions or conditions, we believe the estimates and judgments associated with the reported amounts are appropriate under the circumstances in which they were made. In addition, other companies in similar businesses may utilize different estimation policies and methodologies, which may impact the comparability of our results of operations and financial condition to those companies.

The following policies require significant judgments and estimates on our part in preparing the Company’s consolidated financial statements and the GMH Predecessor Entities’ combined financial statements. Changes in these judgments and estimates could have a material effect on these financial statements.

Revenue Recognition

Student Housing

Student housing revenue includes rental revenue and other property income, standard and incentive management fees, and reimbursements of certain operating expenses. These sources of revenue are described in greater detail below:

·we recognize student housing rental revenue when due over the lease terms, which are generally 12 months or less;

·we recognize other property income, including, but not limited to, lease processing fees, move-in fees, and activity fees as earned throughout the course of the year. The timing of these fees typically fluctuates in relation to the academic year leasing cycle;

·standard management fees are based on a percentage of monthly cash receipts or gross monthly rental and other revenues generated by the properties managed for others. We recognize these fees on a monthly basis as the services are performed;

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·we earn incentive management fees as a result of the achievement of certain operating performance criteria over a specified period by certain managed properties, including targeted annual debt service coverage ratios of the properties. We recognize these fees at the amount that would be due under the contract if the contract was terminated on the balance sheet date; and

·expense reimbursements are comprised primarily of salary and related costs of certain of our employees working at certain properties we manage for others, the cost of which is reimbursed by the owners of the related properties. We accrue operating expense reimbursements as the related expenses are incurred.

Military Housing

We earn military housing revenues for providing services to our military housing privatization projects, including the following:

·standard and incentive management fees, which are based on a percentage of revenue generated by the military housing privatization projects from the basic allowance for housing provided by the government to service members, referred to as BAH, are recognized when the revenue is earned by the military housing projects. Incentive management fees are based upon the satisfaction of certain criteria including, among other things, satisfying designated benchmarks relating to emergency work order response, occupancy rates, home turnover and resident satisfaction surveys. Incentive management fees are recognized when the various criteria stipulated in the management contract have been satisfied;

·standard and incentive development and construction/renovation fees, which are based on a percentage of development and construction/renovation costs incurred by the military housing privatization projects, including hard and soft costs and financing costs, are recognized on a monthly basis as the costs are incurred by the military housing projects. Incentive development and construction/renovation fees are based upon the satisfaction of certain criteria including, among other things, completing a number of housing units according to schedule, achieving specific safety records and implementing small business or minority subcontracting plans. The incentive development and construction/renovation fees are recognized when the various criteria stipulated in the contract have been satisfied. In addition, in certain instances, we may receive fees relating to the performance of pre-construction/renovation services. These pre-construction/renovation fees are determined on a project-by-project basis, and are paid in proportion to the amount of pre-construction/renovation costs incurred by us for the project and recognized as revenue upon performance of the pre-construction/renovation services;

·revenues on fixed-price renovation contracts are recorded on the percentage-of-completion method. When the percentage-of-completion method is used, contract revenue is recognized in the ratio that costs incurred to date bear to estimated costs at completion. Adjustments to cost estimates are made in the period in which the facts requiring such revisions become known. When the revised estimates indicate a loss, such loss is provided for currently in its entirety.

·business development fees are earned from our business partners that provide architectural and design or construction services for our military housing projects. These fees are received in connection with pursuing and coordinating the completion of military housing projects. The fees consist of (i) an annual base fee, which is a fee paid to us in consideration of our ongoing pursuit of additional projects and is not contingent upon the success of those efforts and can be cancelled at any time, and (ii) an additional fee, which is paid over the course of an awarded project based on a percentage of revenue earned by these business partners for providing services to the military housing projects. The base fees are recognized on a straight-line basis over the term of the related business development agreement, which is generally one year. The additional fee is recognized and

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paid to us as the related services are provided to our military housing projects by our business partners.

·equity returns are earned on our investments in military housing projects. During the initial development period for a project, the equity returns are a fixed percentage of our investment and subsequent to the initial development period for a project, the equity returns are based on a fixed percentage of our investment and on the project’s net operating income, subject to cash distribution caps, as defined in the operating agreements related to the particular project. As of December 31, 2006, only the Fort Carson project had passed its initial development period.

Real Estate Investments and Corporate Assets

We carry real estate investments and corporate assets at cost, net of accumulated depreciation. Cost of acquired assets includes the purchase price and related closing costs. We allocate the cost of real estate investments to net tangible and identified intangible assets based on relative fair values in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), Business Combinations. We estimate fair value based on information obtained from a number of sources, including our due diligence, marketing and leasing activities, independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, and other market data.

The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases and (ii) the property valued as if vacant. As lease terms typically are 12 months or less, actual rates on in-place leases generally approximate market rental rates. Factors that we consider in the valuation of in-place leases include an estimate of incremental carrying costs during the expected lease-up periods considering current market conditions and nature of the tenancy. Purchase prices of student housing properties to be acquired are not expected to be allocated to tenant relationships considering the terms of the leases and the expected levels of renewals. We amortize the value of in-place leases to expense over the remaining term of the respective leases, which is generally one year or less.

We expense routine repair and maintenance costs that do not improve the value of an asset or extend its useful life, including turnover costs. We capitalize expenditures that improve the value and extend the useful life of an asset. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is generally 40 years for buildings including student housing properties and the commercial office building, and three to five years for residential furniture and appliances. Commencing towards the end of the second quarter and more significantly during the third quarter of each fiscal year, we typically will experience an increase in property operating expenses over other quarters as a result of repair and maintenance expenditures relating to turnover of units at student housing properties. Our student housing lease terms generally commence in August or September to coincide with the beginning of the academic year. Accordingly, we expect to incur a majority of its repair and maintenance costs during the second and third quarters to prepare for new residents.

In accordance with Statement of Financial Accounting Standards No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. These circumstances may include, but are not limited to, operational performance, market conditions and competition from other off-campus properties and on-campus housing, legal and environmental concerns, and results of appraisals or other information obtained as part of a financing or disposition strategy. When required, we review the recoverability of assets to be held and used through a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in an amount by which the carrying value of the asset exceeds the fair value of the asset determined using

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customary valuation techniques, such as the present value of expected future cash flows. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer would be depreciated.

Allowance for Doubtful Accounts

We estimate the collectibility of receivables generated by rental and other income as a result of the operation of our student housing properties. If we believe that the collectibility of certain amounts is questionable, we record a specific reserve for these amounts to reduce the amount outstanding to an amount we believe will be collectible and a reserve for all other accounts based on a range of percentages applied to aging categories, which is based on historical collection and write-off experience.

We also evaluate the collectibility of fee income and expense reimbursements generated by the management of student housing properties owned by others and through the provision of development, construction, renovation and management services to our military housing privatization projects based upon the individual facts and circumstances, and record a reserve for specific amounts, if necessary.

Minority Interest

Minority interest as initially recorded at the date of our initial public offering represented the net equity of our operating partnership, including the proceeds received from the sale of the warrant to Vornado, multiplied by the ownership percentage of holders of limited partnership units in our operating partnership other than the Company. Our operating partnership is obligated to redeem, at the request of a holder, each unit of limited partnership interest for cash or common shares on a one-for-one basis, at our option, subject to adjustments for share splits, dividends, recapitalizations or similar events; except that Gary M. Holloway, Sr. has the right to require our operating partnership to redeem his and his affiliates’ units of limited partnership interest for common shares, subject to his restriction from owning more than 20% of our outstanding common shares. If the minority interest unit holders’ share of a current year loss would cause the minority interest balance to be less than zero, the minority interest balance will be reported as zero unless there is an obligation of the minority interest holders to fund those losses. Any losses in excess of the minority interest will be charged against equity. If future earnings materialize, equity will be credited for all earnings up to the amount of those losses previously absorbed. Distributions to limited partnership unit holders other than us are recorded as a reduction to minority interest.

Investments in Military Housing Projects and Student Housing Joint Ventures

We own equity interests in the joint ventures that own our military housing privatization projects with the U.S. military to design, develop, construct/renovate and manage the military family housing located on or near various bases throughout the United States. We evaluate our investments in military housing project joint ventures in which we have a variable interest to determine if the underlying entity is a variable interest entity (“VIE”) as defined under FASB Financial Interpretation No. 46 (as revised) (“FIN 46(R)”). We have concluded that each of the military housing project joint ventures in which we have a variable interest is a VIE and we are not the primary beneficiary of any of these VIEs. We record our investments in joint ventures under our military housing projects in accordance with the equity method of accounting. Our investment is initially recorded at cost, and then subsequently adjusted at each balance sheet date to an amount equal to what we would receive from the joint venture in the event that it were liquidated at net book value as of that date, and assuming that the proceeds from the liquidation are distributed in accordance with the terms of, and priority of returns set forth under, the joint venture’s operating agreement. We have exposure to loss to the extent of our investments, if any, and any receivables due from the project.

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We entered into a joint venture in the third quarter of 2005 to develop and construct two student housing properties. We contributed land to the joint venture in exchange for its 10% interest and cash. In addition, we have the option to purchase the joint venture partner’s interest in the joint venture within one year of completion of the properties, and we have provided certain guarantees for the completion of construction and for a portion of the construction loans. As such, the transaction is being accounted for under the financing method, whereby we record the real estate as an asset, depreciate the property, and record a financing obligation. Construction of both properties was completed in August 2006.

Income Taxes

We elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2004. To continue to qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our adjusted taxable income to our shareholders. We believe we are organized and operate in a manner that allows us to qualify for taxation as a REIT under the Code, and it is our intention to adhere to these requirements and maintain our REIT status in the future. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, other than with respect to our taxable REIT subsidiaries.

In conformity with the Code and applicable state and local tax statutes, taxable income or loss of The GMH Predecessor Entities was required to be reported in the tax returns of Gary M. Holloway, Sr. and Vornado, as such entities were treated as pass-through entities for tax purposes. Accordingly, no income tax provision has been reflected in the accompanying combined statements of operations of the GMH Predecessor Entities.

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Results of Operations

The results of operations for the year ended December 31, 2006 and  2005 presented below reflect the results of operations of the Company. The eliminations column represents the management fees that are charged to our student housing—owned segment from our student housing management segment. Such amounts have been eliminated in consolidation.

Comparison of the year ended December 31, 2006 to the year ended December 31, 2005

	Year Ended December 31, 2006
	Student Housing— Owned Properties				Student Housing Management				Military Housing			Corporate				Eliminations				Total
Revenue:
Rent and other property income		$	188,885			$	—			$	—		$	156			$	—		$	189,041
Expense reimbursements:
Related party		—				390				63,622			218				—			64,230
Third party		—				6,013				—			—				—			6,013
Management fees:
Management fees—owned properties		—				7,290				—			—				(7,290		)	—
Related party		—				93				8,388			—				—			8,481
Third party		—				3,167				—			—				—			3,167
Other fee income-related party		—				—				21,635			—				—			21,635
Other income		225				35				72			232				—			564
Total revenue		189,110				16,988				93,717			606				(7,290		)	293,131
Operating Expenses:
Property operating expense		74,927				6,516				6,402			—				—			87,845
Intercompany management fees		7,290				—				—			—				(7,290		)	—
Reimbursed expenses		—				6,403				63,622			218				—			70,243
Real estate taxes		17,913				—				—			97				—			18,010
Administrative expenses		—				—				—			17,682				—			17,682
Audit Committee and Special Committee expenses		—				—				—			7,821				—			7,821
Profits interest and employee initial public offering bonus expense		—				—				—			—				—			—
Depreciation and amortization		42,984				—				444			402				—			43,830
Interest		50,251				—				—			5,082				—			55,333
Total operating expenses		193,365				12,919				70,468			31,302				(7,290		)	300,764
(Loss) income before equity in earnings of unconsolidated entities, minority interest and income taxes		(4,255		)		4,069				23,249			(30,696		)					(7,633		)
Equity in earnings of unconsolidated entities		—				—				3,523			—				—			3,523
(Loss) income before minority interest and income taxes		(4,255		)		4,069				26,772			(30,696		)		—			(4,110		)
Income tax expense (benefit)		—				(337		)		5,070			—				—			4,733
(Loss) Income before minority interest		(4,255		)		4,406				21,702			(30,696		)		—			(8,843		)
Minority interest		—				—				—			(3,857		)		—			(3,857		)
Net (loss)income		$	(4,255	)		$	4,406			$	21,702		$	(26,839	)		$	—		$	(4,986	)

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	Year Ended December 31, 2005
	Student Housing— Owned Properties			Student Housing Management			Military Housing			Corporate				Eliminations				Total
Revenue:
Rent and other property income		$	131,849		$	—		$	—		$	245			$	—		$	132,094
Expense reimbursements:
Related party		—			176			57,436			318				—			57,930
Third party		—			4,650			—			—				—			4,650
Management fees:
Management fees—owned properties		—			5,141			—			—				(5,141		)	—
Related party		—			197			6,808			—				—			7,005
Third party		—			3,774			—			—				—			3,774
Other fee income-related party		—			290			18,000			31				—			18,321
Other income		123			19			108			128				—			378
Total revenue		131,972			14,247			82,352			722				(5,141		)	224,152
Operating Expenses:
Property operating expense		48,992			4,196			4,431			—				—			57,619
Intercompany management fees		5,141			—			—			—				(5,141		)	—
Reimbursed expenses		—			4,826			57,436			318				—			62,580
Real estate taxes		12,191			—			—			—				—			12,191
Administrative expenses		—			—			—			12,254				—			12,254
Audit Committee and Special Committee expenses		—			—			—			—				—			—
Profits interest and employee initial public offering bonus expense		—			—			—			—				—			—
Depreciation and amortization		33,369			—			299			520				—			34,188
Interest		29,493			—			—			1,532				—			31,025
Total operating expenses		129,186			9,022			62,166			14,624				(5,141		)	209,857
Income (loss) before equity in earnings of unconsolidated entities, minority interest and income taxes		2,786			5,225			20,186			(13,902		)		—			14,295
Equity in earnings of unconsolidated entities		—			—			3,073			—				—			3,073
Income (loss) before minority interest and income taxes		2,786			5,225			23,259			(13,902		)		—			17,368
Income tax expense		—			66			5,514			—				—			5,580
Income (loss) before minority interest		2,786			5,159			17,745			(13,902		)		—			11,788
Minority interest		—			—			—			5,729				—			5,729
Net income (loss)		$	2,786		$	5,159		$	17,745		$	(19,631	)		$	—		$	6,059

Student Housing—Owned Properties

Revenue. Of the 75 properties owned as of December 31, 2006 (not including two properties held through a joint venture), we acquired 21 and 24 of the student housing properties during 2006 and 2005, respectively. Rent and other property income from these 75 properties totaled $188.9 million in 2006. Rent and other property income from the 54 properties we owned as of December 31, 2005 was $131.8 million in 2005. The increase in rent and other property income experienced during 2006 relates primarily to (i) the presentation of a full year of operations during 2006 with respect to the 24 properties acquired in 2005, and (ii) the acquisition of an additional 21 properties during 2006. Although we generally seek rent increases that will exceed projected increases in property operating expenses, increases in our property operating expenses exceeded our rent increases from 2005 to 2006, primarily as a result of increases in repairs and maintenance costs, bad debt expense, utility expenses and real estate taxes incurred during 2006. In future periods, our net income will be negatively affected to the extent property operating expenses are higher than those projected by our management for such period prior to lease execution for the applicable academic year.

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With respect to properties we owned during the year ended December 31, 2006 and 2005, referred to herein as our same store properties, our revenues decreased $2.2 million, or 2.4%, in 2006 as compared to 2005. Our revenues were adversely affected by six of these same store properties (which we refer to as the focus properties) that did not achieve the economic occupancy levels we had targeted upon commencement of the 2006-2007 academic year. We believe that these lower than anticipated leasing results are temporary in nature at all of these six focus properties, and we have committed resources to improving their occupancy levels. Our same store revenues, excluding the six focus properties referred to above, increased $0.3 million, or 0.5% , in 2006 as compared to the prior year.

Other income increased slightly to $225,000 in 2006 from $123,000 in 2005. This other income consisted primarily of interest income on invested cash.

Expenses.   Property operating expenses increased to $74.9 million in 2006 from $49.0 million in 2005, primarily due to expenses attributable to the 21 properties acquired in 2006 and our ownership and operation for a full year during 2006 of properties acquired in 2005. The increase of $25.9 million is attributable to the following: a $10.0 million increase in utilities expenses; a $2.8 million increase in turnover and repairs and maintenance expenses; a $5.7 million increase in payroll expenses at the property level; a $1.0 million increase in bad debt expense relating to uncollected rents and other income; and a $6.5 million increase in the property expenses, consisting of marketing, insurance, landscaping and other similar property operating expenses.

With respect to our same store properties, we experienced an increase in property operating expenses of approximately $3.3 million in 2006. Of this increase, $1.6 million relates to utilities; $0.2 million relates to marketing costs; $0.4 million relates to payroll expenses associated with the hiring of additional staff at the property level; $0.5 million relates to bad debt expense associated with uncollected rents; and $0.6 million relates to an increase in other property operating expenses.

We have implemented new policies and procedures relating to capital spending and maintenance, as well as purchasing activities, that are designed to assist with cost containment of future repairs and maintenance expenditures at our properties. We also recently placed a renewed emphasis on our rent collection, which we believe should result in lower bad debt expense in future periods.

Real estate taxes increased to $17.9 million in 2006 from $12.2 million in 2005, primarily due to the acquisition of 21 properties in 2006 and the full year of real estate taxes with respect to the 24 properties we acquired during  2005. Of the $5.7 million increase we experienced in real estate taxes, approximately $0.6 million is specifically related to our same store properties, of which $0.1 million relates to the six focus properties. We expect an overall increase in real estate taxes during 2007 due to a full year of results for the 21 properties acquired during 2006, offset by a  decrease as management implements its business strategy to sell or enter into joint venture agreements with respect to certain of our currently owned student housing properties. We may also see an increase in real estate taxes to the extent that local authorities continue to aggressively pursue higher real estate tax assessments on properties that we currently own.

Depreciation and amortization increased to $43.0 million as compared to $33.4 million in 2005, primarily as a result of acquiring 21 properties in 2006 for an aggregate purchase price of $409.7 million, as well as the inclusion of a full year of depreciation expense relating to the 24 properties acquired during 2005.  The $43.0 million in 2006 is comprised of $37.8 million of depreciation and $5.2 million of lease intangible amortization. We expect depreciation expense to remain essentially unchanged in 2007 due to an increase generated from a full year of results for the 21 properties acquired during 2006, offset by a decrease resulting from management’s 2007 business strategy to sell, or enter into joint venture agreements with respect to certain of our currently owned student housing properties.

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Interest expense increased to $50.3 million in 2006 from $29.5 million in 2005, as a result of incurring additional debt, including placement of new mortgage debt and the assumption of existing mortgage debt, as well as borrowings under our line of credit, in connection with the acquisition of 21 properties in 2006. During 2006, we placed $266.8 million of new mortgage debt, assumed $46.5 million of existing mortgage debt, net of premiums, and increased borrowings under our credit lines by approximately $163.4 million. We expect interest expense to decrease as management implements its business strategy to sell, refinance or enter into joint venture agreements with respect to our currently owned student housing properties, as proceeds from these transactions are used to repay outstanding balances under our line of credit. For more information regarding the amount of fixed-rate and variable-rate indebtedness we held as of December 31, 2006, see the section titled Quantitative and Qualitative Disclosures About Market Risk under Item 7A of this report.

Student Housing Management

Revenue   Expense reimbursements from related parties increased to $390,000 in 2006 from $176,000 in 2005. As of December 31, 2006, the Company no longer manages student housing properties for related parties as the one property that we managed for a related party was sold during December 2006.

Expense reimbursements from third parties increased to $6.0 million in 2006 from $4.7 million in 2005, primarily due to an increase in payroll expenses related to an increase in overall head count for managed  student housing properties in  2006 over 2005. Although we will continue to pursue new third-party management agreements during 2007, we expect expense reimbursements from third parties to contribute less significantly as a percentage of overall revenue going forward, as a result of our increased focus on operations of our own properties and the continued growth in rental revenue that we expect to generate from the full year operations of properties we acquired during 2006, as well as additional properties we acquire in the future.

Management fee income from related parties decreased to $93,000 in 2006 from $197,000 in 2005.  As of December 31, 2006, the Company no longer manages student housing properties for related parties.

Management fee income from third parties decreased from $3.8 million in 2005 to $3.2 million in 2006. We recorded a one-time management fee of $0.8 million that was paid and recognized in 2005 for deferred management fees paid in connection with the sale of the managed property by the third party owner. Excluding the $0.8 million of management fees earned in 2005, management fees would have increased by $0.2 million. Although we will continue to pursue new third-party management agreements during 2007, we expect management fees to contribute less significantly as a percentage of overall revenue going forward.

Other fee income from related parties was $290,000 in 2005. We did not earn other fee income from related parties in 2006. We anticipate that we will generate such revenue during 2007, as a result of fees that we expect to earn from providing development and management services to joint ventures with third-parties that we enter into to finance the development and construction of additional student housing properties.

Expenses.   Property operating expenses increased from $4.2 million in 2005 to $6.5 million in 2006, due to the acquisition of 21 properties in 2006. These expenses are comprised of payroll and general and administrative expenses directly associated with the operations of the Company’s owned and managed portfolios. While those employees who are directly responsible for the oversight of specific properties are charged directly to the Student Housing Owned segment, this segment staffs a full operations department. This department includes those employees responsible for portfolio oversight, which includes regional vice presidents, regional property managers, regional leasing specialists and the associated expenses such as travel directly related to those employees who perform this function. Such expenses are considered part of our student housing management operation.

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Reimbursed expenses, which includes related party and third party managed properties, increased to $6.4 million in 2006 from $4.8 million in 2005. Reimbursed expenses are comprised mostly of payroll expenses for on-site employees. This increase is due to an increase in overall headcount as a result of additional properties managed in 2006 over 2005.

Income taxes amounted to a tax benefit of $337,000 in 2006 as compared to the tax expense of $66,000 in 2005. Income taxes consist primarily of taxes associated with the operations of our student housing taxable REIT subsidiary, which manages properties for third parties. The tax benefit is due to a taxable loss recognized during 2006.

Military Housing

Revenue.   Expense reimbursements totaled $63.6 million in 2006 as compared to $57.4 million in 2005. This increase was primarily due to payroll and renovation expenses related to the nine military housing projects in operation as of December 31, 2006 as compared with the seven military housing projects in operation as of December 31, 2005;  and closing costs and transition expenses for our Fort Gordon project, which commenced operations in May 2006; and closing costs and transition expenses for our Carlisle/Picatinny project. We also experienced an increase in expense reimbursements in 2006 as a result of greater renovation activities at our Fort Bliss/White Sands and Navy Northeast Region projects. This increase was offset by decreases at our Fort Stewart/Hunter, Walter Reed Army Medical Center and Fort Detrick projects caused by anticipated declines in construction and renovation activities, as well as by decreases at our Fort Carson project due to changes in the terms of the management contract in December 2005, which resulted in fewer reimbursable expenses being incurred directly by the project.

Project	2006		2005
	(in millions)
Expense Reimbursements
Fort Stewart and Hunter Army Airfield Project	$	5.4	$	9.4
Fort Carson Project	2.7		6.9
Fort Hamilton Project	1.1		0.5
Walter Reed Army Medical Center and Fort Detrick Project	0.8		1.4
Fort Eustis/Fort Story Project	4.6		4.7
Navy Northeast Region Project	33.3		29.0
Fort Bliss/White Sands Missile Range Project(1)	11.5		5.5
Fort Gordon Project(2)	2.4		—
Carlisle/Picatinny Project(2).	1.8		—
Total expense reimbursements	$	63.6	$	57.4

(1)Commenced operations in the third quarter of 2005.

(2)The Fort Gordon project commenced operations in the second quarter of 2006, and the Carlisle/Picatinny project commenced operations in the third quarter of 2006.

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Management fees from related parties totaled $8.4 million in 2006 as compared to $6.8 million in 2005. The table below sets forth certain information regarding the revenue from management fees from related parties for each of our military housing projects for 2006 and 2005. The amount of management fees from related parties that we receive during a fiscal period is affected by the number of housing units that we manage under our military housing projects during that period, which number will fluctuate based on the number of housing units that we construct/renovate or demolish during that period. Management fees from related parties increased during 2006 as compared to 2005 primarily due to full year operation of our Fort Bliss/White Sands Missile Range project which started during the third quarter of 2005, as well as due to increased occupancy and rental activity at our Fort Stewart/Hunter project, and the commencement of our Fort Gordon project and Carlisle/Picatinny project, during the second quarter of 2006.

Project	2006		2005
	(in millions)
Fort Stewart and Hunter Army Airfield Project	$	1.4	$	1.0
Fort Carson Project	1.2		1.2
Fort Hamilton Project	0.2		0.2
Walter Reed Army Medical Center and Fort Detrick Project	0.3		0.2
Fort Eustis/Fort Story Project	0.5		0.5
Navy Northeast Region Project	3.2		3.2
Fort Bliss/White Sands Missile Range Project(1)	1.3		0.5
Fort Gordon Project(2)	0.1		—
Carlisle/Picatinny Project(2)	0.2		—
Total	$	8.4	$	6.8

(1)Commenced operations in the third quarter of 2005.

(2)The Fort Gordon project commenced operations in the second quarter of 2006, and we commenced management operations for the Carlisle/Picatinny project in the second quarter of 2006.

Other fee income from related parties, which includes development and construction fees and business development fees, totaled $21.6 million in 2006 as compared to $18.0 million in 2005. The table below sets forth certain information regarding the revenue from other fee income from related parties for each of our military housing projects for 2006 and 2005. The amount of other fee income from related parties that we receive during a fiscal period is affected by the level of housing unit development and construction that we perform under our military housing projects during that period. Other fee income from related parties increased during 2006, as compared to 2005,  primarily due to (i)  increased construction /renovation activity relating to our Navy Northeast Region and Fort Eustis/Fort Story projects, (ii)  commencement of operations relating to our Fort Bliss/White Sands Missile Range project during the third quarter of 2005, (iii) commencement of operations at our Fort Gordon and Carlisle/Picatinny project during the second quarter of 2006 and (iv) the commencement of an expansion at our Fort Carson project during the fourth quarter of 2006. These increases were offset by previously expected declines in activities at our Fort Stewart/Hunter project and our Walter Reed Army Medical Center and Fort Detrick project.

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Project	2006		2005
	(in millions)
Development and Construction Fees
Fort Stewart and Hunter Army Airfield Project	$	1.6	$	3.9
Fort Carson Project	0.8		0.3
Fort Hamilton Project	0.6		0.9
Walter Reed Army Medical Center and Fort Detrick Project	0.5		1.2
Fort Eustis/Fort Story Project	1.8		1.1
Navy Northeast Region Project	6.9		4.5
Fort Bliss/White Sands Missile Range Project(1)	3.6		2.1
Fort Gordon Project(2)	1.0		—
Carlisle/Picatinny Project(2)	0.4		—-
Total development and construction/renovation fees	$	17.2	$	14.0
Business Development Fees	$	4.4	$	4.0
Total Other Fee Income—Related Parties	$	21.6	$	18.0

(1)Commenced operations in the third quarter of 2005.

(2)The Fort Gordon project commenced operations in the second quarter of 2006, and the Carlisle/Picatinny project commenced operations in the third quarter of 2006.

Equity in earnings of unconsolidated entities, which includes preferred returns from military housing project joint ventures, totaled $3.5 million and  $3.1 million in 2006 and  2005, respectively. Of the amount for 2006, $0.9 million related to the preferred returns from our Navy Northeast Region project, and $2.6 million related to our investment in the Fort Carson project. Of the 2005 amount, $1.0 million related to preferred returns from our Navy Northeast Region project, and $2.1 million related to our investment in the Fort Carson project.

Expenses.Property operating expenses include costs related to operating the military housing segment of our business, such as the compensation expense related to our military housing personnel located in our corporate headquarters. These costs increased to $6.4 million in 2006 from $4.4 million in 2005. The increase was due to (i) increases in our renovation company operations, (ii) increases in management and administrative expenses related to our overall expansion of our business, and (iii) a favorable adjustment of $0.8 million in 2005 relating to expense reimbursements of 2004 costs associated with the exclusive negotiation-related costs we incurred prior to the closing of the Fort Eustis/Fort Story project.

Reimbursed expenses increased to $63.6 million in 2006 from $57.4 million in 2005 primarily due to payroll and renovation expenses related to the nine military housing projects in operation as of December 31, 2006 as compared with the seven military housing projects in operation as of December 31, 2005, offset by anticipated declines in construction and renovation activity at certain projects as well as by decreases at our Fort Carson project due to changes in the terms of the management contract in December 2005.

Income Taxes.   The effective tax rate on income taxes remained relatively consistent at 35.5% in 2006 versus  35.1% in 2005.

Corporate

Rental revenue and expense reimbursements, which were recognized with respect to the portion of our corporate headquarters leased to entities affiliated with Gary M. Holloway, Sr., and payroll and related expenses reimbursed by entities affiliated with Mr. Holloway for the provision of common services, remained relatively consistent during the years ending December 31, 2006 and 2005.

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Other income, consisting primarily of interest income, remained substantially the same during the years ending December 31, 2006 and 2005.

Administrative expenses, primarily relating to management of our corporate office, accounting, legal, human resources, information technology and acquisition department, increased to $17.7 million in 2006 from $12.3 million in 2005, primarily due to increased staffing resulting from growth in our operating segments, additional costs incurred in connection with the transition of financial management and an increase in professional fees.

Audit Committee and Special Committee expenses consist of legal fees, forensic accounting fees and waiver fees associated with waivers of the covenants under our former credit facility, incurred as a result of delays in the filings of reports with the SEC in connection with the special investigation performed by our Audit Committee and its independent counsel that commenced in the first quarter of 2006, and legal and financial advisory and Special Committee fees associated with the activities of the Special Committee to explore strategic alternatives for the Company. During the year ended December 31, 2006, these fees totaled $7.8 million. The special investigation was completed during the third quarter of 2006, and the Special Committee was dissolved in December 2006.

Depreciation, relating primarily to our corporate assets, decreased to $0.4 million in 2006 from  $0.5 million in 2005, primarily due to the transfer of the corporate aircraft in February 2005 to Mr. Holloway.

Interest expense increased to $5.1 million in 2006 from $1.5 million in 2005, primarily due to a $1.1 million write-off of deferred costs associated with our former line of credit with Bank of America, which was terminated and replaced with a new line of credit with Wachovia Bank in October 2006, amortization of $1.7 million of deferred costs associated with our new line of credit, as well as increased outstanding borrowings under our lines of credit coupled with an increase in interest rates.

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Comparison of the year ended December 31, 2005 to the year ended December 31, 2004

	Year Ended December 31, 2005
	Student Housing- Owned Properties			Student Housing Management			Military Housing		Corporate				Eliminations				Total
Revenue:
Rent and other property income		$	131,849		$	—	$	—		$	245			$	—		$	132,094
Expense reimbursements:
Related party		—			176		57,436			318				—			57,930
Third party		—			4,650		—			—				—			4,650
Management fees:
Management fees—owned properties		—			5,141		—			—				(5,141		)	—
Related party		—			197		6,808			—				—			7,005
Third party		—			3,774		—			—				—			3,774
Other fee income-related party		—			290		18,000			31				—			18,321
Other income		123			19		108			128				—			378
Total revenue		131,972			14,247		82,352			722				(5,141		)	224,152
Operating Expenses:
Property operating expenses		48,992			4,196		4,431			—				—			57,619
Intercompany management fees		5,141			—		—			—				(5,141		)	—
Reimbursed expenses		—			4,826		57,436			318				—			62,580
Real estate taxes		12,191			—		—			—				—			12,191
Administrative expenses		—			—		—			12,254				—			12,254
Profits interest and employee initial public offering bonus expense		—			—		—			—				—			—
Depreciation and amortization		33,369			—		299			520				—			34,188
Interest		29,493			—		—			1,532				—			31,025
Total operating expenses		129,186			9,022		62,166			14,624				(5,141		)	209,857
Income (loss) before equity in earnings of unconsolidated entities and income taxes		2,786			5,225		20,186			(13,902		)		—			14,295
Equity in earnings of unconsolidated entities		—			—		3,073			—				—			3,073
Income (loss) before income taxes		2,786			5,225		23,259			(13,902		)		—			17,368
Income taxes		—			66		5,514			—				—			5,580
Income (loss) before minority interest		2,786			5,159		17,745			(13,902		)		—			11,788
Minority interest		—			—		—			5,729				—			5,729
Net income (loss)		$	2,786		$	5,159	$	17,745		$	(19,631	)		$	—		$	6,059

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	Year Ended December 31, 2004
	Student Housing- Owned properties			Student Housing Management			Military Housing		Corporate				Eliminations				Total
Revenue:
Rent and other property income		$	25,251		$	—	$	—		$	399			$	—		$	25,650
Expense reimbursements:
Related party		—			1,140		31,822			347				—			33,309
Third party		—			7,203		—			—				—			7,203
Management fees:
Management fees—owned properties		—			1,028		—			—				(1,028		)	—
Related party		—			1,458		2,897			—				—			4,355
Third party		—			3,986		—			—				—			3,986
Other fee income-related party		—			—		8,460			—				—			8,460
Other income		34			92		393			396				—			915
Total revenue		25,285			14,907		43,572			1,142				(1,028		)	83,878
Operating Expenses:
Property operating expenses		9,420			5,271		6,497			—				—			21,188
Intercompany management fees		1,028			—		—			—				(1,028		)	—
Reimbursed expenses		—			8,343		31,822			347				—			40,512
Real estate taxes		1,887			—		—			—				—			1,887
Administrative expenses		—			—		—			6,006				—			6,006
Profits interest and employee initial public offering bonus expense		—			—		—			37,502				—			37,502
Depreciation and amortization		6,214			—		25			915				—			7,154
Interest		5,579			—		—			493				—			6,072
Total operating expenses		24,128			13,614		38,344			45,263				(1,028		)	120,321
Income (loss) before equity in earnings of unconsolidated entities and income taxes		1,157			1,293		5,228			(44,121		)		—			(36,443		)
Equity in earnings of unconsolidated entities		—			—		—			—				—			—
Income (loss) before income taxes		1,157			1,293		5,228			(44,121		)					(36,443		)
Income taxes		—			33		279			—				—			312
Income (loss) before minority interest		1,157			1,260		4,949			(44,121		)		—			(36,755		)
Minority interest		—			—		—			247				—			247
Net income (loss)		$	1,157		$	1,260	$	4,949		$	(44,368	)		$	—		$	(37,002	)

Student Housing—Owned Properties

Revenue.   Of the 54 properties owned as of December 31, 2005, we acquired 30 of the student housing properties during 2004 and the remaining 24 properties during 2005. Rent and other property income from these 54 properties totaled $131.8 million in 2005. Rent and other property income from the 30 properties we owned as of December 31, 2004 was $25.3 million in 2004. The increase in rent and other property income experienced during 2005 relates primarily to (i) the presentation of a full year of operations during 2005 with respect to the 30 properties acquired in 2004, and (ii) the acquisition of an additional 24 properties during 2005. Although we generally seek rent increases that will exceed projected increases in property operating expenses, increases in our property operating expenses exceeded our rent increases from 2004 to 2005, primarily as a result of increases in utility expenses and real estate taxes experienced during 2005 that were greater than what we had anticipated when establishing rental rates.

Other income increased to $123,000 in 2005 from $34,000 in 2004. This other income consisted primarily of interest income on invested cash.

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Expenses.   Property operating expenses increased to $49.0 million in 2005 from $9.4 million in 2004, primarily due to expenses attributable to the 24 properties acquired in 2005 and our ownership and operation throughout 2005 of the 30 properties acquired in 2004.

Real estate taxes increased to $12.2 million in 2005 from $1.9 million in 2004 primarily due to the acquisition of 24 properties in 2005 and the full year of real estate taxes with respect to the 30 properties we owned as of December 31, 2004.

Depreciation and amortization increased to $33.4 million in 2005 from $6.2 million in 2004 primarily as a result of acquiring 24 properties in 2005 for an aggregate purchase price of $545.7 million. The $33.4 million in 2005 is comprised of $25.2 million of depreciation and $8.2 million of lease intangible amortization.

Interest expense increased to $29.5 million in 2005 from $5.6 million in 2004 as a result of incurring additional debt, including placement of new mortgage debt and the assumption of existing mortgage debt, as well as borrowings under our line of credit, in connection with the acquisition of 24 properties in 2005. During 2005, we placed $274.3 million of new mortgage debt, assumed $118.9 million of existing mortgage debt, and increased borrowings under our line of credit by a net of $36.0 million.

Student Housing Management

Revenue.   Expense reimbursements from related parties decreased to $0.2 million in 2005 from $1.1 million in 2004, primarily due to our acquisition in March 2005 from related parties of two student housing properties that we managed prior to purchase. In addition, in March 2005, we ceased managing an additional student housing property owned by a related party upon the sale of the property.

Expense reimbursements from third parties decreased to $4.7 million in 2005 from $7.2 million in 2004, primarily due to our ceasing in 2005 to provide services to five student housing properties owned by third parties upon the sale of the properties.

Management fee income from related parties decreased to $0.2 million in 2005 from $1.5 million in 2004. The decrease in management fee income was primarily due to our acquisition in March 2005 from related parties of two student housing properties that we managed prior to purchase. In addition, in March 2005 we ceased managing an additional student housing property owned by a related party upon the sale of the property.

Management fee income from third parties decreased from $4.0 million in 2004 to $3.8 million in 2005, which income included an increase of $0.8 million related to our recognition of a one-time management fee in 2005 that had not been previously recognized because it was deemed to be uncollectible and was paid to us upon the sale of the property by the third party owner, and which was partially offset by our ceasing to manage five student housing properties owned by third parties upon the sale of the properties.

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Other fee income from related parties in 2005 was $290,000 compared to no other fee income in 2004.

Expenses.   Property operating expenses decreased from $5.3 million in 2004 to $4.2 million in 2005. These expenses are comprised of payroll and general and administrative expenses directly associated with the operations of our owned and managed portfolios. The amounts for 2004 include those costs incurred for the predecessor entities from January 2004 through November 1, 2004 and the various management businesses we operated at that time.

Reimbursed expenses decreased to $4.8 million in 2005 from $8.3 million in 2004, primarily due to our acquisition from related parties in March 2005 of two student housing properties that we managed prior to our purchase. In addition, during 2005, we ceased providing management services relating to five student housing properties owned by third parties and a student housing property owned by a related party upon the sale of the properties.

Income taxes amounted to $66,000 in 2005 compared to $33,000 in 2004. Income taxes consist primarily of taxes associated with the operations of our student housing taxable REIT subsidiary.

Military Housing

Revenue.   Expense reimbursements totaled $57.4 million in 2005, as compared to $31.8 million in 2004, primarily due to payroll and renovation expenses related to the seven military housing projects in operation as of December 31, 2005 as compared with the five military housing projects in operation as of December 31, 2004; closing costs and transition expenses for the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005; and reimbursed expenses for the Fort Hamilton project, the Walter Reed Army Medical Center and Fort Detrick project, the Fort Eustis/Fort Story project and the Navy Northeast Region project, which were in operation for all of 2005 but only a portion of 2004.

In addition, reimbursements of costs incurred in the development of CDMPs totaled $0.4 million in 2005 relating to the Fort Bliss/White Sands Missile Range project, and $1.0 million in 2004 relating to the Fort Hamilton project, Walter Reed Army Medical Center/Fort Detrick project and the Fort Eustis/Fort Story project. The table below sets forth certain information regarding the revenue from expense reimbursements and reimbursed costs for CDMP development for each of our military housing projects for 2005 and 2004. Only the Fort Stewart and Hunter Army Airfield project and the Fort Carson project were in operation throughout all of 2004 and 2005.

Project	2005		2004
	(in millions)
Expense Reimbursements
Fort Stewart and Hunter Army Airfield Project	$	9.4	$	7.0
Fort Carson Project	6.9		11.8
Fort Hamilton Project(1)	0.5		1.1
Walter Reed Army Medical Center and Fort Detrick Project(2)	1.4		0.9
Fort Eustis/Fort Story Project(3)	4.7		4.3
Navy Northeast Region Project(3)	29.0		6.7
Fort Bliss/White Sands Missile Range Project(4)	5.5		—
Total expense reimbursements	$	57.4	$	31.8
Reimbursed costs	$	0.4	$	1.0

(1)Commenced operations in the second quarter of 2004.

(2)Commenced operations in the third quarter of 2004.

(3)Commenced operations in the fourth quarter of 2004.

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(4)Commenced operations in the third quarter of 2005.

Management fees from related parties totaled $6.8 million in 2005 compared to $2.9 million in 2004. The table below sets forth certain information regarding the revenue from management fees from related parties for each of our military housing projects for 2005 and 2004. The amount of management fees from related parties that we receive during a fiscal period is affected by the number of housing units that we manage under our military housing projects during that period, which number will fluctuate based on the number of housing units that we construct/renovate or demolish during that period. Management fees from related parties increased significantly during 2005 primarily due to commencement of operations relating to our Navy Northeast Region project in the fourth quarter of 2004 and a full year of operations for our other projects.

Project	2005		2004
	(in millions)
Fort Stewart and Hunter Army Airfield Project	$	1.0	$	1.0
Fort Carson Project	1.2		1.1
Fort Hamilton Project(1)	0.2		0.1
Walter Reed Army Medical Center and Fort Detrick Project(2)	0.2		0.1
Fort Eustis/Fort Story Project(3)	0.5		—		(4)
Navy Northeast Region Project(3)	3.2		0.5
Fort Bliss/White Sands Missile Range Project(5)	0.5		—
Total	$	6.8	$	2.9

(1)Commenced operations in the second quarter of 2004.

(2)Commenced operations in the third quarter of 2004.

(3)Commenced operations in the fourth quarter of 2004.

(4)Amount constituted less than $0.1 million.

(5)Commenced operations in the third quarter of 2005.

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Other fee income from related parties, which includes development and construction fees and business development fees, totaled $18.0 million in 2005 compared to $8.5 million in 2004. The table below sets forth certain information regarding the revenue from other fee income from related parties for each of our military housing projects for 2005 and 2004. The amount of other fee income from related parties that we receive during a fiscal period is affected by the level of housing unit development and construction that we perform under our military housing projects during that period. Other fee income from related parties increased significantly during 2005 primarily due to commencement of operations relating to our Navy Northeast Region project in the fourth quarter of 2004 and a full year of operations for our other projects.

Project	2005		2004
	(in millions)
Development and Construction Fees
Fort Stewart and Hunter Army Airfield Project	$	3.9	$	2.3
Fort Carson Project	0.3		0.8
Fort Hamilton Project(1)	0.9		0.5
Walter Reed Army Medical Center and Fort Detrick Project(2)	1.2		1.0
Fort Eustis/Fort Story Project(3)	1.1		—		(4)
Navy Northeast Region Project(3)	4.5		1.7
Fort Bliss/White Sands Missile Range Project(5)	2.1		—
Total development and construction/renovation fees	$	14.0	$	6.3
Business development fees	$	4.0	$	2.2
Total Other Fee Income—Related Parties	$	18.0	$	8.5

(1)Commenced operations in the second quarter of 2004.

(2)Commenced operations in the third quarter of 2004.

(3)Commenced operations in the fourth quarter of 2004.

(4)Amount constituted less than $0.1 million.

(5)Commenced operations in the third quarter of 2005.

Equity in earnings of unconsolidated entities, which includes preferred returns from military housing project joint ventures, totaled $3.1 million for 2005. Of the 2005 amount, $1.0 million related to preferred returns from our Navy Northeast project, and $2.1 million related to our investment in Fort Carson Family Housing LLC.

Expenses.   Property operating expenses include costs related to operating the military housing segment of our business. These costs decreased to $4.4 million in 2005 from $6.5 million in 2004 primarily due to the presence in 2004 of costs associated with integrating the Fort Eustis/Fort Story project and the Navy Northeast Region project, both of which commenced operations in the fourth quarter of 2004; partially offset by costs in 2005 associated with integrating the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005.

Reimbursed expenses increased to $57.4 million in 2005 from $31.8 million in 2004 primarily due to payroll and renovation expenses related to the seven military housing projects in operation as of December 31, 2005 as compared with the five military housing projects in operation as of December 31, 2004; closing costs and transition expenses for the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005; and reimbursed expenses for the Fort Hamilton project, the Walter Reed Army Medical Center and Fort Detrick project, the Fort Eustis/Fort Story project and the Navy Northeast Region project, which were in operation for all of 2005 but only a portion of 2004.

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Corporate

Rental revenue, other fee income—related party, other income, and expense reimbursements, which were recognized with respect to the portions of our corporate headquarters leased to entities affiliated with Gary M. Holloway, Sr., and payroll and related expenses reimbursed by entities affiliated with Mr. Holloway for the provision of common services, decreased to $0.7 million in 2005 from $1.1 million in 2004, primarily as a result of a reduced level of services provided to these entities as compared to 2004.

Reimbursed expenses remained unchanged at $0.3 million for the year ended December 31, 2005 from $0.3 million for the year ended December 31, 2004.

Administrative expenses, primarily relating to management of our corporate office, accounting, legal, human resources,  information technology, corporate aircraft, and acquisitions department increased to $12.3 million in 2005 from $6.0 million in 2004, primarily due to increased staffing and additional costs incurred in connection with becoming a public company and growth in our operating segments.

Depreciation, relating primarily to our corporate assets, decreased to $0.5 million in 2005 from $0.9 million in 2004, primarily due to the transfer of the corporate aircraft in February 2005 back to Mr. Holloway.

Interest expense increased to $1.5 million in 2005 from $0.5 million in 2004, primarily due to increased outstanding borrowings on our line of credit.

Compensation expense was recorded in 2004 relating to profits interests awarded by Gary M. Holloway to certain employees of the GMH Predecessor Entities and other entities affiliated with Mr. Holloway in recognition of past services. These employees were eligible to participate in the net proceeds or value received by Mr. Holloway upon the sale or disposition of certain student housing properties and the military housing business in excess of Mr. Holloway’s equity investments in such assets. These employees rendered all services and satisfied all conditions necessary to earn the right to benefit from these profits interests as of the date that such profits interests were awarded. In accordance with Financial Accounting Standards Statement No.5, Accounting for Contingencies, compensation expense relating to the award of these profits interests was required to be recognized by the GMH Predecessor Entities when the sale or disposition of the assets resulting in proceeds received by Mr. Holloway in an amount in excess of his equity investment in such assets became probable. This amount became probable during the third quarter of 2004 when, in connection with the contribution of the ownership interests in GMH Military Housing LLC, College Park Management Inc. and other assets by Mr. Holloway to our operating partnership in anticipation of the initial public offering of the Company, the remaining profits interests awards were amended to fix the value of such awards at $33.2 million to be paid to these employees unconditionally. Accordingly, this amount was recognized in the third quarter of 2004 and Mr. Holloway’s obligations regarding the profits interests were satisfied upon the transfer of $33.2 million of units of limited partnership in our operating partnership to these employees on November 2, 2004, the closing date of our initial public offering.

Liquidity and Capital Resources

Short-term liquidity requirements consist primarily of funds necessary to pay operating expenses and other costs. These expenses and costs include (i) recurring maintenance and capital expenditures to maintain and lease our properties, (ii) interest expense and scheduled principal payments on outstanding indebtedness, (iii) real estate taxes and insurance, (iv) corporate salaries, employee benefits and other corporate overhead and administrative expenses, (v) equity contributions to our investments in military housing projects, and (vi) distributions to shareholders and unitholders of our operating partnership. We currently are using existing working capital and cash provided by operations, together with amounts available to us under our $250 million revolving line of credit with Wachovia Bank, to meet our short-term

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liquidity requirements. As of March 15, 2007, we had approximately $138 million of indebtedness outstanding under the line. Going forward, however, our additional borrowings from the line of credit generally must be approved by Wachovia in its sole and absolute discretion. The line of credit has an initial maturity date of June 1, 2007, but may be extended for up to an additional four months, subject to payment of a fee in an amount equal to 2% of the outstanding principal balance of the loan as of the initial maturity date and an increase in the interest rate under the line from a Eurodollar rate based on LIBOR plus 2% to LIBOR plus 4.5%. In no event may the maturity date of the line of credit extend beyond October 2, 2007.

In December 2006, our management announced a strategic plan, to begin in early 2007, that involves the identification of various currently-owned student housing properties that would be placed for sale, refinanced and/or contributed into a joint venture in an effort to generate cash proceeds to be used to pay down our line of credit prior to its initial maturity date. In February 2007, we completed the refinancing of four student housing properties, resulting in net proceeds of approximately $73.6 million that were used to repay an equal amount of indebtedness under the line of credit and reducing our outstanding loan balance under the line from approximately $211 million to $138 million. In addition, we have entered into letters of intent regarding the sale of seven student housing properties and to form a joint  venture with a third party institutional investor covering another six properties. Currently, we expect these sales and joint venture to be completed in the second quarter of 2007. The Company also is in discussions with several financial institutions with respect to a new line of credit, targeted to have a three-year term and be in the range of $50 to $100 million.

Our current line of credit contains affirmative and negative covenants and also contains financial covenants which, among other things, require that we maintain (i) a fixed charge coverage ratio with respect to the student housing properties, as defined in the line of credit, of at least 1.25 to 1.00, (ii) a consolidated tangible net worth, as defined by the line of credit agreement, of at least $455 million, (iii) maintain quarterly minimum aggregate Adjusted Management EBITDA relating to the military housing segment and student housing managed properties, as defined in the line of credit agreement, of $5 million, and (iv) our federal tax status as a REIT. As of December 31, 2006, we were in compliance these financial covenants.

We elected to be treated as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2004. As a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders on an annual basis. Therefore, except as discussed below, as a general matter, a substantial portion of cash generated by our operations will be used to fund distributions to shareholders and holders of limited partnership interests in our operating partnership, and will not be available to satisfy our liquidity needs. Future dividends will be declared at the discretion of our Board of Trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other such factors as our Board of Trustees deems relevant. For the fourth quarter of 2006, we declared a quarterly dividend distribution of $0.165 per common share, payable to shareholders of record on December 29, 2006. We distributed this dividend on February 1, 2007, and at the same time, our operating partnership paid a distribution of $0.165 per unit to holders of limited partnership interest in our operating partnership. Historically, since our initial public offering in 2004, our full quarterly dividend distributions were equal to $0.2275 per common share. Our Board of Trustees lowered our quarterly dividend distribution for the fourth quarter of 2006 after an evaluation of the Company’s liquidity, and we cannot assure you that we will continue to have cash available for distributions at historical levels or at all. Any distributions we pay in the future will depend upon our actual results of operations, economic conditions and other factors that could differ materially from our current expectations. To the extent that our cash flow from operations is insufficient to fund our anticipated dividend distributions, we may seek to borrow funds under our credit facility or through other third party debt financing or we may lower our dividend distribution. Our available cash for distributions will be affected by a number of factors, including: our ability to complete our strategic plans for the sale,

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refinancing and joint venture of multiple student housing properties as outlined above; the revenue we receive from our student housing properties; revenues from management fees in connection with management services that we will provide for student housing properties owned by others; revenues from our military housing projects; our operating expenses; interest expense; costs related to our pending class action lawsuits; and any unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see the section entitled “Risk Factors” in Part I, Item 1A of this report.

As of December 31, 2006, 68 of our owned student housing properties, two student housing properties in which we have an ownership interest, as well as our corporate office building, were encumbered by security interests relating to notes payable aggregating $1.018 billion, exclusive of net debt premium amounts, and secured by first liens on the individual assets with a net book value of approximately $1.023 billion. These notes payable had a weighted-average interest rate of 5.18%, mature at various dates between March 2007 and June 2024 and require monthly payments of principal and interest or monthly payments of interest only. The table below sets forth for 2007, the five succeeding years and thereafter the aggregate annual principal payments of the above-referenced indebtedness (dollars in thousands):

2007	$	46,369
2008	32,684
2009	45,042
2010	100,008
2011	95,565
2012 and thereafter	698,374
	$	1,018,042

With regard to our military housing privatization projects, we are typically required to fund our portion of the equity commitment to the project’s joint venture after all other sources of funding for the project have been expended. With respect to our Navy Northeast Region project and our AETC Group I project, however, we were required to fund the equity commitment at commencement of the project. We made a $9.5 million equity contribution in November 2004 relating to our Navy Northeast Region project, an $8.0 million equity contribution in February 2007 relating to our AETC Group I project, and, as of December 31, 2006, had contractually committed to contribute an aggregate of $2.0 million in 2007 to our Fort Hamilton project; $5.9 million in 2007 to our Walter Reed Army Medical Center/Fort Detrick project of which $4.0 million has been funded through February 2007; $3.6 million in 2010 for our Fort Eustis/Fort Story project;  $3.0 million in 2010 or 2011 for our Carlisle/Picatinny project;  $8.0 million in 2011 for our Fort Stewart and Hunter Army Airfield project;  an aggregate of $4.5 million to our Fort Gordon project in several phases that commence in 2011 and end in 2012, and $6.3 million in 2012 for our Fort Bliss/White Sands project. These equity contributions help to fund the development, construction and renovation of housing units at these bases during their respective initial development periods.

Typically, we are reimbursed for certain payroll expenses relating to the student housing properties we manage for third parties, for certain costs we incur after we are awarded the right to exclusively negotiate agreements for a military housing project until we enter into agreements for the project and for transition costs we incur shortly before initiation of our management of a military housing project. However, we are required to fund these costs prior to the time we receive the reimbursements. Typically, our military projects require approximately $1.0 million to $7.0 million in costs associated with transition and exclusive negotiations, depending on the size of the project. The expenditures typically begin 12 months prior to executing an agreement for the military housing project. Accordingly, the timing between our payments and reimbursements for projects may add to our short-term liquidity needs.

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If cash flows from any of our military housing privatization projects are insufficient to meet the coverage ratios or benchmarks entitling us to receive fee payments, any unpaid fees will accumulate and be subsequently paid from operations or upon dissolution of the projects to the extent that funds are available and the applicable thresholds are met. If these thresholds are not met, we will not have access to or receive certain of the fees we have earned. The unavailability of these funds would materially impact our ability to meet our short-term and long-term liquidity needs. We will be required to make equity contributions at the beginning of the initial development period for typical Navy transactions and at the end of the initial development period for typical Army transactions. We also were required to make our equity contribution at the beginning of the initial development period for our AETC Group I project with the Air Force. Based on our current expectations regarding the terms of the debt funding for our military housing projects, we expect that the projects will generate sufficient cash flows to fund the reinvestment account and pay anticipated equity returns.

With regard to our currently owned student housing properties, we do not have any material short-term capital commitments, other than with respect to our short-term capital needs relating to the general expenses and costs associated with operating and managing these properties. We will require, however, funds in connection with our anticipated acquisitions of student housing properties. During at least the first half of 2007, we currently expect to place less emphasis on the acquisition of additional student housing properties, and to continue to focus on the operational performance of our existing student housing properties and development projects. If we are able to complete our strategic plan as outlined above, pay down our existing line of credit and obtain a new long-term line of credit, we may determine that it is appropriate to place greater emphasis on the acquisition of student housing properties that are located in our targeted markets and that meet management’s underwriting criteria for creating long-term growth potential. To the extent that we seek to acquire student housing properties during at least the first half of 2007, we will consider funding the acquisition through joint venture structures similar to the joint venture terms that we entered into with respect to our Orono, Maine and Bowling Green, Ohio development properties. The timing of any acquisitions or development projects will be dependent upon various factors, including the ability to complete satisfactory due diligence, to find suitable joint venture partners and agree upon mutually acceptable joint venture terms, to obtain appropriate debt financing on the properties, and the availability of capital. We would also consider funding our equity portion of any joint ventures by using funds from available cash from operations or borrowings. We may also determine that it is appropriate to purchase student housing properties outright, as opposed to with a joint venture partner, depending upon factors which may include, but are not limited to, the applicable purchase price, available capital, and projected returns with respect to the property.

For the remainder of 2007, we also expect to incur significant legal fees in connection with our pending class action litigation. These fees could impact the level of cash from operations that we would otherwise expect to be available for the acquisition of student housing properties, and therefore could affect the number of acquisitions that we seek to complete during the next six to 12 months.

Long-term liquidity requirements with respect to our student housing and military housing segments consist primarily of amounts necessary to fund scheduled debt maturities, renovations and other non-recurring capital expenditures that need to be made periodically at our properties, and the costs associated with acquisitions of student housing properties and awards or acquisitions of military housing privatization projects that we pursue. Historically, we have satisfied our long-term liquidity requirements through various sources of capital, including existing working capital, cash provided by operations, and long-term mortgage indebtedness. We now expect our long-term liquidity requirements to be satisfied primarily through cash generated by operations that is not used to fund distributions and the additional external financing sources discussed above.

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Contractual Obligations

The following table summarizes our contractual obligations, as well as obligations under certain acquisition contracts we consider probable of completion as of December 31, 2006 for this year, the four succeeding years and thereafter, in the aggregate.

Contractual Obligations(1)	2007		2008		2009		2010		2011		Thereafter		Total
	(in thousands)
Notes payable(2)	$	46,369	$	32,684	$	45,042	$	100,008	$	95,565	$	698,374	$	1,018,042
Line of credit	199,435		—		—		—		—		—		199,435
Interest(3)	65,902		53,912		50,477		46,580		42,181		133,787		392,839
Operating leases(4)	393		393		395		405		405		18,692		20,683
Acquisitions of properties(5)	19,009		—		—				—		—		19,009
Equity contribution(6)	7,830		—		—		6,600		12,510		6,300		33,240
Employment/consulting agreements(7)	1,464		876		438		—		—		—		2,778
	$	340,402	$	87,865	$	96,352	$	153,593	$	150,661	$	857,153	$	1,686,026

(1)Excludes individual contractual obligations with a value of less than $25,000, contractual obligations relating to our operations that may be terminated with notice of one month or less and contractual obligations for which we expect to be reimbursed.

(2)Represents scheduled payments of principal.

(3)Represents estimated future interest payments on debt outstanding at December 31, 2006, including borrowings under our line of credit. These estimated amounts assume that all debt remains outstanding until the debt maturity date as provided in the applicable loan agreement, and also assumes the same interest rates that were in effect as of December 31, 2006. We also have assumed for purposes of this table, that we repay our line of credit on its initial maturity date of June 1, 2007.

(4)Represents ground leases with respect to two of our student housing properties. One ground lease ends on September 1, 2051 with the ability to renew for two additional five-year terms. The other ground lease ends on October 31, 2054 with the ability to renew for one additional 49-year term. The rental payment is subject to increases every five years, based on increases in the consumer price index (CPI) of at least 3%. The rental increases are based on an assumed CPI increase of 3% every five years. Actual rental payments may vary from the amounts presented based on the actual CPI increases that are used to calculate the rent increases.

(5)Represents the contractual obligations to purchase one student housing property and fourteen undeveloped parcels of land that we had under agreement of sale as of December 31, 2006.

(6)Represents contractual commitments to fund equity contributions to military housing privatization projects. Excludes $8.0 million in equity funded in connection with our AETC Group I project, which was paid upon closing of the project award on February 6, 2007.

(7)We are subject to employment agreements with each our executive officers, including Gary M. Holloway, Sr.,  Bruce F. Robinson, John DeRiggi, J. Patrick O’Grady and Joseph M. Macchione. Each of these agreement has an initial term of three years. The initial term of the agreements for Messrs. Holloway and Robinson ends on November 2, 2007. In addition, we are subject to a consulting agreement with Joseph M. Coyle, the former president of our student housing business, who resigned from the Company. The consulting agreement, which became effective on January 1, 2006, had an initial term of 17 months.

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Cash Distribution Policy

Commencing with our taxable year ended December 31, 2004, we filed a tax return electing to be treated as a REIT under the Code, and we expect to continue to qualify as a REIT. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute our REIT taxable income to our shareholders, but the taxable income generated by our taxable REIT subsidiaries will be subject to regular corporate income tax. We intend to make at least the minimum distributions required to maintain our REIT qualifications under the Code. Holders of units of our limited partnership will also be entitled to distributions of cash equivalent to dividends per share paid to our common shareholders.

Inflation

As a majority of our student housing leases are 12 months or less, rates on in-place leases generally approximate market rental rates. We believe that inflationary increases in expenses may be offset to a certain extent by rent increases upon renewal. A majority of our military housing management fees, construction/renovation fees and business development fees are based on a percentage of revenue or expenses generated by us or the military housing privatization projects. Inflationary increases in expenses may not be offset by increases in revenue.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

Given current market conditions, our strategy favors fixed-rate, secured debt over variable-rate debt to minimize our exposure to increases in interest rates. As of December 31, 2006, 79% of the outstanding principal amount of our notes payable secured by properties we owned had fixed interest rates with a weighted-average rate of 5.18%. The remaining 21% of outstanding principal amount of our notes payable and our line of credit, at December 31, 2006, had variable interest rates primarily equal to LIBOR plus 2.0%.

As of December 31, 2006, we had $199.4 million in funds drawn from our credit facility, bearing a variable weighted average interest rate of 7.35%.

As of December 31, 2006, based on our variable rate debt balances described above, if interest rates were to increase by 1.0%, our interest expense would increase by approximately $2.6 million on an annual basis.

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Item 8.Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

	PAGE
Reports of Independent Registered Public Accounting Firms		94
GMH Communities Trust Consolidated Balance Sheets as of December 31, 2006 and 2005		96
GMH Communities Trust and The GMH Predecessor Entities Consolidated and Combined Statements of Operations for the years ended December 31, 2006 and 2005, the period from November 2, 2004 through December 31, 2004, and the period from January 1, 2004 through November 1, 2004		97
GMH Communities Trust and The GMH Predecessor Entities Consolidated and Combined Statements of Beneficiaries’ and Owners’ Equity for the years ended December 31, 2006 and 2005, the period from November 2, 2004 through December 31, 2004, and the period from January 1, 2004 through November 1, 2004		98
GMH Communities Trust and The GMH Predecessor Entities Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2006 and 2005, the period from November 2, 2004 through December 31, 2004, and the period from January 1, 2004 through November 2, 2004		99
Notes to Consolidated and Combined Financial Statements		100

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Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders
GMH Communities Trust

We have audited the accompanying consolidated balance sheet of GMH Communities Trust as of December 31, 2006, and the related consolidated statements of operations, beneficiaries’ equity and cash flows for the year ended December 31, 2006. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in Item 15(c). These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GMH Communities Trust as of December 31, 2006, and the results of their operations and their cash flows for the year ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of GMH Communities Trust’ s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2007 expressed an unqualified opinion on management’s assessment of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

/s/  REZNICK GROUP,  P.C.
Baltimore, Maryland
March 14, 2007

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Report of Independent Registered Public Accounting Firm

The Board of Trustees and Shareholders of GMH Communities Trust

We have audited the accompanying consolidated balance sheet of GMH Communities Trust as of December 31, 2005, and the related consolidated statements of operations, beneficiaries’ equity, and cash flows for the year ended December 31, 2005 and for the period from November 2, 2004 to December 31, 2004 and the combined statements of operations, owner’s equity, and cash flows of The GMH Predecessor Entities for the period from January 1, 2004 to November 1, 2004. Our audits also included the financial statement schedules as of December 31, 2005 and 2004 and for each of the years then ended, listed in the Index at Item 15(c). These financial statements and schedules are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GMH Communities Trust at December 31, 2005, and the related consolidated results of its operations and its cash flows for the year ended December 31, 2005 and for the period from November 2, 2004 to December 31, 2004 and the combined results of operations and cash flows of The GMH Predecessor Entities for the period from January 1, 2004 to November 1, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein as of  December 31, 2005 and 2004 and for each of the years then ended.

/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
July 27, 2006, except Note 13 (for 2005 and 2004)
as to which the date is March 15, 2007

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GMH COMMUNITIES TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and number of shares)

	December 31, 2006				December 31, 2005
ASSETS
Real estate investments:
Student housing properties		$	1,659,422			$	1,210,255
Accumulated depreciation		66,855				29,039
		1,592,567				1,181,216
Corporate assets:
Corporate assets		9,427				8,178
Accumulated depreciation		1,002				565
		8,425				7,613
Cash and cash equivalents		22,539				2,240
Restricted cash		16,955				11,625
Accounts and other receivables, net:
Related party		17,131				19,191
Third party		2,762				2,925
Investments in military housing projects		37,987				37,828
Deferred contract costs		2,480				1,063
Deferred financing costs, net		5,103				4,088
Lease intangibles, net		2,468				3,201
Deposits		907				2,856
Other assets		4,666				4,105
Total assets		$	1,713,990			$	1,277,951
LIABILITIES AND BENEFICIARIES’ EQUITY
Mortgage notes payable		$	1,028,290			$	692,069
Line of credit		199,435				36,000
Accounts payable		3,213				5,566
Accrued expenses		27,257				21,253
Dividends and distributions payable		12,077				16,227
Other liabilities		28,446				21,337
Total liabilities		1,298,718				792,452
Minority interest		157,972				188,633
Commitments and Contingencies (Note 11)		—				—
Beneficiaries’ equity:
Common shares of beneficial interest, $0.001 par value; 500,000,000 shares authorized, 41,567,146 and 39,699,843 issued and outstanding at December 31, 2006 and 2005, respectively		42				40
Preferred shares—100,000,000 shares authorized, no shares issued or outstanding		—				—
Additional paid-in capital		325,347				325,135
Cumulative earnings		1,324				6,310
Cumulative dividends		(69,413		)		(34,619		)
Total beneficiaries’ equity		257,300				296,866
Total liabilities and beneficiaries’ equity		$	1,713,990			$	1,277,951

See accompanying notes to consolidated and combined financial statements.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(in thousands, except per share information)

	For the year ended December 31, 2006 (Company)				For the year ended December 31, 2005 (Company)			Period from January 1 to November 1, 2004 (Predecessor)				Period from November 2 to December 31, 2004 (Company)
Revenue:
Rent and other property income		$	189,041			$	132,094		$	11,453			$	14,197
Expense reimbursements:
Related party		64,230				57,930			19,494				13,815
Third party		6,013				4,650			6,287				916
Management fees:
Related party		8,481				7,005			3,120				1,235
Third party		3,167				3,774			3,537				449
Other fee income—related party		21,635				18,321			4,899				3,561
Other income		564				378			509				406
Total revenue		293,131				224,152			49,299				34,579
Operating Expenses:
Property operating expenses		87,845				57,619			13,234				7,954
Reimbursed expenses		70,243				62,580			25,781				14,731
Real estate taxes		18,010				12,191			824				1,063
Administrative expenses		17,682				12,254			3,095				2,911
Audit Committee and Special Committee expenses		7,821				—			—				—
Profits interests and employee initial public offering bonus expense		—				—			37,502				—
Depreciation and amortization		43,830				34,188			3,264				3,890
Interest		55,333				31,025			2,852				3,220
Total operating expenses		300,764				209,857			86,552				33,769
(Loss) income before equity in earnings of unconsolidated entities, minority interest and income taxes		(7,633		)		14,295			(37,253		)		810
Equity in earnings of unconsolidated entities		3,523				3,073			—				—
(Loss) income before minority interest and income taxes		(4,110		)		17,368			(37,253		)		810
Income taxes		4,733				5,580			—				312
(Loss) income before minority interest		(8,843		)		11,788			(37,253		)		498
Minority interest		(3,857		)		5,729			—				247
Net (loss) income		$	(4,986	)		$	6,059		$	(37,253	)		$	251
(Loss) Earnings per share—basic		$	(0.12	)		$	0.19						$	0.01
(Loss) Earnings per share—diluted		$	(0.12	)		$	0.18						$	0.01

See accompanying notes to consolidated and combined financial statements.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
CONSOLIDATED AND COMBINED STATEMENTS OF BENEFICIARIES’ AND OWNER’S EQUITY
(in thousands, except number of shares and per share information)

					The Company
	Predecessor					Par Value of			Additional
	Owner’s Equity				Common Shares	Common Shares			Paid-in Capital			Cumulative Earnings				Cumulative Dividends
Balance at January 1, 2004		$	3,594		—		—		—				—				—
Cash contributions		129,330			—		—		—				—				—
Cash distributions		(32,253		)	—		—		—				—				—
Profits interest (See Note 10)		33,180			—		—		—				—				—
Net property contributions		1,992			—		—		—				—				—
Net loss from January 1, 2004 to November 1, 2004		(37,253		)	—		—		—				—				—
Exchange of equity for units of limited partnership		(13,255		)			—		13,255				—				—
Balance at November 1, 2004		85,335			—		—		13,255				—				—
Sale of common stock, net of offering costs		—			30,350,989		30		331,695				—				—
Redemption of Vornado’s Class B partnership interests (see Note 1)		(77,300		)	—		—		—				—				—
Cash distributions		(8,035		)	—		—		—				—				—
Transfer to minority interest (see Note 2)		—			—		—		(144,674		)		—				—
Dividends ($0.16 per common share)		—			—		—		—				—				(4,856		)
Net income from November 2, 2004 to December 31, 2004		—			—		—		—				251				—
Balance at December 31, 2004		—			30,350,989		30		200,276				251				(4,856		)
Transfer of Corporate Flight Services to Gary M. Holloway, Sr. (see Note 9)		—			—		—		87				—				—
Sale of common stock, net of offering costs		—			9,315,000		10		124,641				—				—
Dividends ($0.91 per common share)		—			—		—		—				—				(29,763		)
Shares issued to non-employee trustees		—			33,854		—		—				—				—
Amortization of share compensation		—			—		—		131				—				—
Net income for year ended December 31, 2005		—			—		—		—				6,059				—
Balance at December 31, 2005		—			39,699,843		40		325,135				6,310				(34,619		)
Dividends ($0.8475 per common share)		—			—		—		—				—				(34,794		)
Shares issued to employee and non-employee trustees		—			50,056		—		—				—				—
Shares issued upon conversion of warrants		—			1,817,247		2		(2		)		—				—
Redemption of limited partnership units		—			—		—		(46		)		—				—
Amortization of share compensation		—			—		—		260				—				—
Net loss for year ended December 31, 2006		—			—		—		—				(4,986		)		—
Balance at December 31, 2006		$	—		41,567,146		$	42	$	325,347			$	1,324			$	(69,413	)

See accompanying notes to consolidated and combined financial statements.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(in thousands)

	For the year ended December 31, 2006 (Company)				For the year ended December 31, 2005 (Company)				Period from January 1 to November 1, 2004 (Predecessor)				Period from November 2, to December 31, 2004 (Company)
Cash flows from operating activities:
Net (loss) income		$	(4,986	)		$	6,059			$	(37,253	)		$	251
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation		38,280				25,678				2,372				2,469
Amortization:
Lease intangibles		5,167				8,235				893				1,421
Amortization of debt premium		(2,511		)		(2,242		)		(295		)		(374		)
Deferred loan costs		4,040				1,245				60				329
Other amortization		643				406				—				—
Bad debt expense		2,693				1,632				—				—
Equity in earnings of unconsolidated entities in excess of distributions received		(904		)		(3,073		)		—				—
Minority interest		(3,857		)		5,729				—				247
Changes in operating assets and liabilities:
Restricted cash		(5,330		)		(9,312		)		(2,595		)		282
Accounts and other receivables		(470		)		(13,198		)		(4,737		)		(2,076		)
Deferred contract costs		(1,417		)		(937		)		(5,972		)		5,785
Deposits and other assets		1,388				(2,241		)		(7,040		)		13,529
Accounts payable		1,855				4,129				4,175				(2,455		)
Accrued expenses and other liabilities		12,018				28,192				11,564				(5,472		)
Accrued profits interest		—				—				33,180				—
Net cash provided by (used in) operating activities		46,609				50,302				(5,648		)		13,936
Cash flows from investing activities:
Property acquisitions		(367,308		)		(407,428		)		(167,140		)		(272,975		)
Capitalized expenditures		(19,890		)		(20,316		)		(87		)		(207		)
Distributions received from unconsolidated entities in excess of earnings		412				5,468				—				—
Contributions to unconsolidated entities		—				—				—				(10,600		)
Purchase of management contract		—				—				(1,189		)		—
Net cash used in investing activities		(386,786		)		(422,276		)		(168,416		)		(283,782		)
Cash flows from financing activities:
Owner distributions		(65,748		)		(50,987		)		(32,253		)		(126,463		)
Owner contributions		—				—				129,330				41,128
Redemption of unit holders		(45		)		—				—				—
Proceeds from mortgage notes payable		272,487				277,989				103,898				61,470
Repayment of mortgage notes payable		(4,598		)		(71,852		)		(808		)		(507		)
Line of credit borrowings		327,435				306,000				—				—
Line of credit payments		(164,000		)		(270,000		)		—				—
Payment of financing costs		(5,055		)		(2,513		)		(1,031		)		(2,165		)
Proceeds of public offerings		—				132,749				—				342,359
Costs related to public offerings		—				(8,098		)		(5,443		)		(5,194		)
Net cash provided by financing activities		360,476				313,288				193,693				310,628
Net increase (decrease) in cash and cash equivalents		20,299				(58,686		)		19,629				40,782
Cash and cash equivalents, beginning of period		2,240				60,926				515				20,144
Cash and cash equivalents, end of period		$	22,539			$	2,240			$	20,144			$	60,926
Supplemental information
Real estate acquired by assuming debt including debt premium		$	47,388			$	122,376			$	128,622			$	61,258
Issuance of units of limited partnership interest for purchase of student housing properties		$	—			$	28,570			$	—			$	8,054
Property distributed at net book value		$	—			$	3,854			$	(381	)		$	—
Debt distributed at net book value		$	—			$	4,208			$	—			$	—
Issuance of units of limited partnership interest for purchase of military housing joint venture		$	—			$	—			$	—			$	31,000
Furniture and computers contributed at net book value		$	—			$	—			$	463			$	—
Interest paid		$	51,318			$	28,686			$	2,142			$	2,617
Income taxes paid		$	4,683			$	5,115			$	—			$	—

See accompanying notes to consolidated and combined financial statements.

99

GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements
December 31, 2006

1.Organization and Basis of Presentation

Organization

GMH Communities Trust (the “Trust,” the “Company,” or sometimes referred to as “we”) elected to qualify as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the “Code”) commencing with its taxable year ended December 31, 2004. The Trust was formed as a Maryland real estate investment trust in May 2004 and prior to completion of our initial public offering, had no operations. We completed our initial public offering on November 2, 2004, pursuant to which we sold an aggregate of 30,350,989 common shares of beneficial interest at an offering price of $12.00 per share, and raised an aggregate of $331.7 million in net proceeds, after deducting the underwriters’ discount and other offering-related expenses. We contributed the net proceeds from the offering to our operating partnership, GMH Communities, LP, a Delaware limited partnership (the “Operating Partnership”), in exchange for units of partnership interest.

On October 4, 2005, we sold 9,315,000 common shares of beneficial interest, including 1,215,000 shares issued upon full exercise of the underwriters’ over-allotment option, at an offering price of $14.25 per share. The Company raised an aggregate of $124.6 million in net proceeds from the offering after deducting the underwriters’ discounts, payment of financial advisory fees and other offering-related expenses. The net proceeds of this offering, which the Company contributed to the Operating Partnership in exchange for units of partnership interest, were used by the Operating Partnership to repay outstanding indebtedness under our credit facility. As of December 31, 2006, the Operating Partnership had 73,191,763 units of partnership interest outstanding, of which the Trust owned 40,985,977 units of limited partnership interest; and through a wholly-owned subsidiary, GMH Communities GP Trust, the Trust owned 581,169 units of general partnership interest, which represents 100% of the general partnership interest in the Operating Partnership. As of December 31, 2006, there were 31,624,617 units of limited partnership interest outstanding that were not owned by the Company.

We, through the Operating Partnership and its subsidiaries, are a self-advised, self-managed, specialty housing company that focuses on providing housing to college and university students residing off-campus and to members of the U.S. military and their families located on or near military bases throughout the United States. Through the Operating Partnership, we own and operate our student housing properties and the interests in joint ventures that own military housing privatization projects (“military housing projects”).

Formation Transactions

The Operating Partnership commenced operations on July 27, 2004, when Gary M. Holloway, Sr., our chairman, president, and chief executive officer, Vornado Realty Trust (“Vornado”), and certain entities affiliated with Mr. Holloway and Vornado, entered into an agreement to contribute various assets to the Operating Partnership. Under the terms of the contribution agreement, Mr. Holloway contributed equity interests relating to student housing properties and military housing projects owned by him and by entities affiliated with him, including College Park Management, Inc., GMH Military Housing, LLC, other entities owning a 10% interest in four student housing properties, and other related assets in exchange for 66,000 Class A partnership interests in the Operating Partnership. Vornado agreed to contribute up to $159.0 million to the Operating Partnership in exchange for 34,000 Class B partnership interests. In connection with its investment in the Operating Partnership, Vornado also purchased a warrant for

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

1.Organization and Basis of Presentation (Continued)

$1.0 million to acquire, at its option, a number of units of limited partnership interest in the Operating Partnership, common shares in the Trust, or a combination of both, representing a 38.264% economic interest in the Operating Partnership or the Trust, as the case may be, immediately prior to completion of our initial public offering. In addition, in connection with the closing of our initial public offering on November 2, 2004, Mr. Holloway further contributed his interests in 353 Associates, L.P. and Corporate Flight Services, LLC, a student housing property and other related assets to the Operating Partnership. We collectively refer to College Park Management, Inc., GMH Military Housing, LLC, 353 Associates, L.P. and Corporate Flight Services, LLC, together with the Operating Partnership, as The GMH Predecessor Entities.

The following are descriptions of each of The GMH Predecessor Entities, other than the Operating Partnership:

·353 Associates, L.P. owns and operates a 44,721 square foot commercial office building located in Newtown Square, Pennsylvania. In connection with the completion of our initial public offering on November 2, 2004, Mr. Holloway and an entity wholly-owned by him contributed 100% of the equity interests in 353 Associates, L.P. to the Operating Partnership. The building is currently used as the Company’s corporate headquarters. 353 Associates, L.P. historically leased the building to certain of The GMH Predecessor Entities and other entities owned or controlled by Mr. Holloway. We continue to lease a portion of the building to certain other entities owned or controlled by Mr. Holloway that were not contributed to the Company in connection with our initial public offering.

·College Park Management, Inc. performed property management and asset management services for residential apartment properties leased to students at colleges and universities located throughout the United States. In connection with the formation of the Operating Partnership on July 27, 2004, Mr. Holloway consented to the merger of College Park Management, Inc. with and into College Park Management, LLC, a wholly-owned subsidiary of the Operating Partnership. College Park Management TRS, Inc., a subsidiary of College Park Management, LLC, has made an election to be treated for federal income tax purposes as a “taxable REIT subsidiary,” as defined in the Code.

·GMH Military Housing, LLC, through its wholly-owned subsidiaries, engages in the development, construction, renovation and management of family military housing units located on or near military bases throughout the United States. In connection with the formation of the Operating Partnership on July 27, 2004, Mr. Holloway contributed 100% of the outstanding equity interests in GMH Military Housing, LLC and each of its wholly-owned subsidiaries to the Operating Partnership. GMH Military Housing, LLC has made an election to be treated as a corporation for federal income tax purposes as a “taxable REIT subsidiary,” as defined in the Code.

·Corporate Flight Services, LLC owned and operated a corporate aircraft that had been leased to certain of The GMH Predecessor Entities and other entities owned or controlled by Mr. Holloway that were not contributed to the Company in connection with our initial public offering. In connection with the completion of our initial public offering on November 2, 2004, Mr. Holloway contributed 100% of the outstanding equity interests in Corporate Flight Services, LLC to the

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

1.Organization and Basis of Presentation (Continued)

Operating Partnership. In February 2005, the Company transferred its interest in Corporate Flight Services, LLC, including the corporate aircraft and associated debt initially contributed to the Operating Partnership at the time of the initial public offering, back to Mr. Holloway. See Note 9.

The exchange of contributed interests has been accounted for as a reorganization of entities under common control. Accordingly, the contributed assets and assumed liabilities have been recorded at the historical cost of The GMH Predecessor Entities.

Redemption of Operating Partnership Interests

Prior to our initial public offering, Vornado and Mr. Holloway were the sole equity holders of the Operating Partnership and each held, through affiliated entities, general partnership interests in the Operating Partnership. Concurrent with the closing of the Company’s initial public offering on November 2, 2004, we became the sole general partner of the Operating Partnership. In accordance with the terms of the limited partnership agreement of the Operating Partnership and concurrent with the completion of our initial public offering on November 2, 2004, we paid approximately $77.3 million to Vornado relating to the redemption of all of Vornado’s Class B partnership interests in the Operating Partnership based on Vornado’s $113.8 million contribution to the Operating Partnership as of the date of the offering, plus a preferential return in the amount of $13.5 million, and after giving effect to the surrender by Vornado of $50.0 million in value of its pre-offering partnership interest in the Operating Partnership, as payment for the portion of its warrant required to be exercised upon completion of our initial public offering under the terms of the warrant. Upon closing of our initial public offering, Vornado exercised the warrant to purchase 6,666,667 units of limited partnership interest in our Operating Partnership at a price of $7.50 per unit, which represented a 20.972% economic interest in the Operating Partnership immediately prior to our initial public offering. On May 2, 2006, the expiration date under the warrant, Vornado received an additional 1,817,247 of our common shares through a net, or cashless, exercise feature of the warrant.

In addition, in connection with the redemption of Vornado’s Class B interests in the Operating Partnership and amendment to the partnership agreement for the Operating Partnership on November 2, 2004, Mr. Holloway’s Class A limited partnership interest and managing general partnership interest in the Operating Partnership were exchanged for 19,624,294 limited partnership units and Mr. Holloway contributed additional assets to the Operating Partnership, including interests in entities that own our corporate headquarters and aircraft and interests in an additional student housing property.

Basis of Presentation

The financial statements of GMH Communities Trust included herein present the consolidated financial position of the Company and its subsidiaries as of December 31, 2006 and 2005 and the consolidated results of their operations and their cash flows for the years ended December 31, 2006 and 2005 and the period from November 2, 2004 through December 31, 2004. All intercompany items and transactions have been eliminated.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

1.Organization and Basis of Presentation (Continued)

The financial statements of The GMH Predecessor Entities included herein present the combined results of their operations and their cash flows for the period from January 1, 2004 to November 1, 2004. All intercompany items and transactions have been eliminated.

Liquidity

On October 2, 2006, the Company entered into a $250.0 million revolving line of credit with Wachovia Bank. The line of credit had an initial term of six months, which was subsequently amended in February 2007 to extend the initial term through June 1, 2007. If not repaid, the Company can extend the maturity to October 2, 2007, with the payment of an additional 2% of the outstanding principal balance and an increase in the interest rate charged from LIBOR plus 2% to LIBOR plus 4.5%. In December 2006, the Company announced that it had developed a business strategy to repay the outstanding line of credit through a combination of refinancing certain properties and selling other properties to third parties or through a joint venture in which the Company would retain an interest. While an overall pool of assets were evaluated to effect this strategy, the specific properties to be sold had not been identified and, therefore, did not meet the requirements under Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), to be presented as discontinued operations at December 31, 2006. During the first quarter of 2007, the criteria for classification as held for sale under SFAS No. 144 was met, as the specific properties for sale were identified and the Board of Trustees approved the plan to sell the specific properties.

The refinancing portion of this strategy was completed in February 2007 and generated net proceeds of $73.6 million that were used to repay an equal amount of outstanding indebtedness under the Company’s line of credit. As of the date of this report, the Company had executed letters of intent to sell seven of our currently-owned student housing properties, as well as a non-binding letter of intent with a third party institutional investor to enter into a joint venture that will cover an additional six of our currently-owned student housing properties. The net carrying value and outstanding notes payable balances of these 13 properties were $236.3 million and $138.6 million, respectively as of December 31, 2006. Although these transactions were still in the due diligence phase as of the date of this report, and the Company has not executed binding agreements, the Company currently expects to complete these transactions during the second quarter of 2007. The proceeds from these transactions also will be used to repay outstanding indebtedness under our line of credit. The Company intends to terminate the line of credit upon repayment of all outstanding balances, and also is negotiating for a long-term line of credit to be in effect upon the termination of the existing line of credit.

The Company currently expects that the business strategy outlined above, if successful, will result in the repayment of the existing line of credit and leave two currently-owned student housing properties unencumbered. The unencumbered properties should provide sufficient financing capacity throughout 2007 and the Company expects to supplement that capacity with a new line of credit.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.   Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect various amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Real Estate Investments and Corporate Assets

We carry real estate investments and corporate assets at cost, net of accumulated depreciation. Cost of acquired assets includes the purchase price and related closing costs. We allocate the cost of real estate investments to net tangible and identified intangible assets based on relative fair values in accordance with SFAS No. 141 (“SFAS 141”), Business Combinations. We estimate fair value based on information obtained from a number of sources, including our due diligence, marketing and leasing activities, independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, and other market data.

The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases and (ii) the property valued as if vacant. As lease terms typically are 12 months or less, actual rates on in-place leases generally approximate market rental rates. Factors that we consider in the valuation of in-place leases include an estimate of incremental carrying costs during the expected lease-up periods considering current market conditions and nature of the tenancy. Purchase prices of student housing properties to be acquired are not expected to be allocated to tenant relationships considering the terms of the leases and the expected levels of renewals. We amortize the value of in-place leases to expense over the remaining term of the respective leases, which is generally one year or less. Accumulated amortization related to intangible lease costs was $2.0 million at December 31, 2006 and $3.2 million at December 31, 2005.

We expense routine repair and maintenance expenditures that do not improve the value of an asset or extend its useful life, including turnover costs. We capitalize expenditures that improve the value and extend the useful life of an asset. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is generally 40 years for buildings including student housing properties and the commercial office building, and three to five years for residential furniture and appliances. Commencing towards the end of the second quarter and more significantly during the third quarter of each fiscal year, the Company typically will experience an increase in property operating expenses over other quarters as a result of repair and maintenance expenditures relating to turnover of units at student housing properties. The Company’s student housing lease terms generally commence in August or September to coincide with the beginning of the academic year. Accordingly, the Company expects to incur a majority of its repair and maintenance costs in the second and third quarters to prepare for new residents.

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. These circumstances may include, but are not limited to, operational performance, market conditions and competition from other off-campus properties and on-campus housing, legal and

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

environmental concerns, and results of appraisals or other information obtained as part of a financing or disposition strategy. When required, we review recoverability of assets to be held and used through a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in an amount by which the carrying value of the asset exceeds the fair value of the asset determined using customary valuation techniques, such as the present value of expected future cash flows. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer would be depreciated.

Cash Equivalents

All highly-liquid investments with an original maturity of three months or less are considered to be cash equivalents. The Company has substantially all of its cash and short-term investments with one major financial institution. Such cash balances, at times, may exceed FDIC limits.

Restricted Cash

Restricted cash consists of security deposits and cash held as escrow for real estate taxes, capital expenditures and other amounts, as required by the terms of various loan agreements.

Allowance for Doubtful Accounts

We estimate the collectibility of receivables generated by rental and other income as a result of the operation of our student housing properties. If we believe that the collectibility of certain amounts is questionable, we record a specific reserve for these amounts to reduce the amount outstanding to an amount we believe will be collectible and a reserve for all other accounts based on a range of percentages applied to aging categories, which is based on historical collection and write-off experience.

We also evaluate the collectibility of fee income and expense reimbursements generated by the management of student housing properties owned by others and through the provision of development, construction, renovation, and management services to our military housing projects based upon the individual facts and circumstances, and record a reserve for specific amounts, if necessary.

Accounts receivable are presented net of the allowance for doubtful accounts of $331,000 and $710,000 at December 31, 2006 and 2005, respectively.

Deferred Financing Costs

Costs incurred in connection with obtaining financing are deferred and amortized on a straight-line basis over the term of the related loan, which is not materially different than the effective interest method. Amortization of deferred financing costs is included in interest expense. Accumulated amortization of deferred financing costs was $2.9 million and $1.2 million at December 31, 2006 and 2005, respectively.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

Deferred Contract Costs

Deferred contract costs include costs attributable to a specific military housing project incurred in connection with seeking Congressional approval of a Community Development and Management Plan, or CDMP, subsequent to the project being awarded by the Department of Defense, or DoD. In addition, deferred contract costs also include transition and closing costs incurred that are expected to be reimbursed by the military housing project. Such amounts are evaluated as to the probability of recovery and costs that are not considered probable of recovery are written off. Revenue is recognized and the related costs are expensed at the time that the reimbursement for preparing the CDMP is approved by Congress or at closing of the military housing project.

Deposits

Deposits primarily consist of amounts paid to third parties in connection with planned acquisitions, amounts paid to lenders that provide related financing or the refinancing of existing loans and deposits paid to utility companies. At December 31, 2006, deposits for planned acquisitions totaled $155,000 and other deposits totaled $752,000. At December 31, 2005, deposits for planned acquisitions totaled $2.1 million, deposits related to financings totaled $160,000 and other deposits totaled $623,000.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, restricted cash, accounts and other receivables, deposits, other assets, accounts payable, accrued expenses, dividends and distributions payable, and other liabilities approximate fair value because of the relatively short-term nature of these instruments.

Debt assumed in connection with property acquisitions is recorded at fair value at the date of acquisition and the resulting premium or discount is amortized through interest expense over the remaining term of the debt, resulting in a non-cash decrease (in the case of a premium) or increase (in the case of a discount) in interest expense.

The carrying value and fair value of fixed-rate notes payable at December 31, 2006 was approximately $971 million and $964 million, respectively. Fair value was estimated using rates the Company believed were available to it as of December 31, 2006 for debt with similar terms. The carrying value of variable-rate notes payable approximates fair value at December 31, 2006.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was $2.0 million , $1.7 million, $0.1 million, and $0.1 million  for the years ended December 31, 2006 and 2005, the period from January 1, 2004 to November 1, 2004 and  the period from November 2, 2004 to December 31, 2004, respectively.

Revenue Recognition

Student Housing Owned Properties Segment

Rental revenue is recognized when due over the lease terms, which are generally 12 months or less.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

Other property income, including, but not limited to, lease processing fees, move-in fees, and activity fees is recognized as earned throughout the course of the year. The timing of these fees typically fluctuates in relation to the academic year leasing cycle.

Student Housing Managed Properties Segment

Standard management fees are based on a percentage of monthly cash receipts or gross monthly rental and other revenues generated by the properties managed for others. We recognize these fees on a monthly basis as the services are performed.

Incentive management fees are earned as a result of the achievement of certain operating performance criteria over a specified period by certain managed properties, including targeted annual debt service coverage ratios of the properties. We recognize these fees at the amount that would be due under the contract if the contract was terminated on the balance sheet date.

Expense reimbursements are comprised primarily of salary and related costs of certain of our employees working at certain properties we manage for others, the cost of which is reimbursed by the owners of the related properties. We accrue operating expense reimbursements as the related expenses are incurred.

Military Housing Segment

Standard and incentive management fees, which are based on a percentage of effective gross revenue generated by the military housing privatization projects from the basic allowance for housing (BAH) provided by the government to service members are recognized when the revenue is earned by the military housing projects. Incentive management fees are based upon the satisfaction of certain criteria including, among other things, satisfying designated benchmarks relating to emergency work order response, occupancy rates, home turnover and resident satisfaction surveys. Incentive management fees are recognized when the various criteria stipulated in the management contract have been satisfied. Accrued and unbilled incentive management fees of $1.0 million are included in accounts receivable—related party at both December 31, 2006 and 2005.

Standard and incentive development and construction/renovation fees, which are based on a percentage of development and construction/renovation costs incurred by the military housing projects, including hard and soft costs and financing costs, are recognized on a monthly basis as the costs are incurred by the military housing projects. Incentive development and construction/renovation fees are based upon the satisfaction of certain criteria including, among other things, completing a number of houses according to schedule, achieving specific safety records and implementing small business or minority subcontracting plans. Incentive development and construction/renovation fees are recognized when the various criteria stipulated in the contract have been satisfied. Accrued and unbilled incentive development and construction/renovation fees of $2.3 million and $2.7 million are included in accounts receivable—related party at December 31, 2006 and 2005, respectively.

Revenues on fixed-price renovation contracts are recorded on the percentage-of-completion method. When the percentage-of-completion method is used, contract revenue is recognized in the ratio that costs incurred to date bear to estimated costs at completion. Adjustments to cost estimates are made in the

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

period in which the facts requiring such revisions become known. When the revised estimates indicate a loss, such loss is currently provided for in its entirety.

Business development fees are earned from our business partners that provide architectural and design or construction services for the Company’s military housing projects. The fees consist of (i) an annual base fee, which is a fee paid to the Company in consideration of the Company’s ongoing pursuit of additional projects and is not contingent upon the success of those efforts and can be cancelled at any time, and (ii) an additional fee, which is paid over the course of an awarded project based on a percentage of revenue earned by these business partners for providing services to the Company’s military housing projects. The base fees are recognized on a straight-line basis over the term of the related business development agreement, which is generally one year. The additional fee is recognized and paid to us as the related services are provided to our military housing projects by our business partners.

In certain instances, the Company may receive fees relating to the performance of pre-construction/renovation services. These pre-construction/renovation fees are determined on a project-by-project basis, and are (i) paid in proportion to the amount of pre-construction/renovation costs incurred by us for the project, and (ii) recognized as revenue upon performance of the pre-construction/renovation services.

The Company earns equity returns on its investments in military housing projects. During the initial development period for a project, the equity returns are a fixed percentage of our investment and subsequent to the initial development period for a project, the equity returns are based on a fixed percentage of our investment and on the project’s net operating income, subject to cash distribution caps, as defined in the operating agreements related to the particular project. As of December 31, 2006, only the Fort Carson project had passed its initial development period.

Expense reimbursements are comprised primarily of renovation expenses and property management expenses, the costs of which are reimbursed by the military housing projects to which they relate. The expenses include payments to third parties for renovation services, and include salaries and related costs of the Company’s employees that are managing the renovation and property management services. The Company accrues expense reimbursements as the related expenses are incurred.

Minority Interest

Minority interest as initially reported at the date of our initial public offering represented the net equity of the Operating Partnership, including the proceeds received from the sale of the warrant to Vornado, multiplied by the ownership percentage of holders of limited partnership units in the Operating Partnership other than the Company. The Operating Partnership is obligated to redeem, at the request of a holder, each unit of limited partnership interest for cash or common shares on a one-for-one basis, at the Company’s option, subject to adjustments for share splits, dividends, recapitalizations and similar events; except that Gary M. Holloway, Sr. has the right to require the Operating Partnership to redeem his and his affiliates’ units of limited partnership interest for common shares, subject to his restriction from owning more than 20% of the Company’s outstanding common shares. If the minority interest unitholders’ share of a current year loss would cause the minority interest balance to be less than zero, the minority interest balance will be reported as zero unless there is an obligation of the minority interest holders to fund those

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

losses. Any losses in excess of the minority interest will be charged against equity. If future earnings materialize, equity will be credited for all earnings up to the amount of those losses previously absorbed. Distributions to limited partnership unitholders other than the Company are recorded as a reduction to minority interest.

Investments in Military Housing Projects and Student Housing Joint Ventures

We own equity interests in the joint ventures that own our military housing privatization projects with the U.S. military to design, develop, construct/renovate and manage the military family housing located on or near various bases throughout the United States. The Company evaluates its investments in military housing project joint ventures in which we have a variable interest to determine if the underlying entity is a variable interest entity (“VIE”) as defined under FASB Financial Interpretation No. 46 (as revised) (“FIN 46(R)”). The Company has concluded that each of the military housing project joint ventures in which it has a variable interest is a VIE and that the Company is not the primary beneficiary of any of these VIEs. We record our investments in joint ventures under our military housing projects in accordance with the equity method of accounting. Our investment is initially recorded at cost, and then subsequently adjusted at each balance sheet date to an amount equal to what we would receive from the joint venture in the event that it were liquidated at net book value as of that date, and assuming that the proceeds from the liquidation are distributed in accordance with the terms of, and priority of returns set forth under, the joint venture’s operating agreement. The Company has exposure to loss to the extent of its investments, if any, and any receivables due from the project.

The Company entered into a joint venture in the third quarter of 2005 to develop and construct two student housing properties. The Company contributed land to the joint venture in exchange for its 10% interest and cash. In addition, the Company has the option to purchase the joint venture partner’s interest in the joint venture within one year of completion of the properties, and the Company has provided certain guarantees for a portion of the construction loans. As such, the transaction is being accounted for as a financing arrangement, whereby the Company records the real estate as an asset, depreciates the property, and records a financing obligation. Construction was completed in August 2006.

Income Taxes

The Company elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2004. To continue to qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our adjusted taxable income to our shareholders. We believe we are organized and operate in a manner that allows us to qualify for taxation as a REIT under the Code, and it is our intention to adhere to these requirements and maintain the Company’s REIT status in the future. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, other than with respect to the Company’s taxable REIT subsidiaries.

In conformity with the Code and applicable state and local tax statutes, taxable income or loss of The GMH Predecessor Entities was required to be reported in the tax returns of Gary M. Holloway, Sr. and Vornado, as such entities were treated as pass-through entities for tax purposes. Accordingly, no income

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

tax provision has been reflected in the accompanying combined statement of operations of The GMH Predecessor Entities.

Audit Committee and Special Committee Expenses

During the first quarter of 2006, the Audit Committee of our Board of Trustees initiated an investigation promptly following receipt of a letter from the Company’s former Chief Financial Officer, alleging, among other things, a “tone at the top” problem within management, and raising concerns regarding various accounting methodologies that were being considered by management in connection with certain transactions that occurred in the fourth quarter of 2005. The Audit Committee conducted the investigation with the assistance of independent legal counsel, as well as a forensic accounting firm retained by the Audit Committee’s counsel. The investigation was completed during the third quarter of 2006.

During 2006, the Board of Trustees formed a Special Committee to explore strategic alternatives for the Company. The Special Committee was disbanded in December 2006.

The Company incurred significant legal, accounting, financial advisory as well as committee fees in connection with both the Audit Committee investigation and activities of the Special Committee. All costs have been expensed as incurred and are reported in Audit Committee and Special Committee expenses on the accompanying consolidated statements of operations.

Adoption of Recent Accounting Pronouncements

Share based compensation

On January 1, 2006, the Company adopted the provisions of SFAS No. 123R, as revised, “Share-Based Payments.” SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” The scope of SFAS No. 123R includes a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. SFAS No. 123R requires companies to recognize in their financial statements the compensation expense relating to share-based payment transactions. The adoption of SFAS No. 123R did not have a material impact on the Company’s financial condition or results of operations during 2006.

Accounting for misstatements

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108 (SAB 108) which addresses how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in current-year financial statements. SAB 108 requires companies to quantify misstatements using both the balance-sheet and income-statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. Upon initial adoption, if the effect of the misstatement is determined to be material, SAB 108 allows companies to record that effect as a cumulative effect adjustment to beginning of year retained earnings. The Company adopted SAB 108 during 2006 and there was no impact on the Company’s financial condition.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

2.Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (FIN 48), which prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. FIN 48 will be effective for fiscal years beginning after December 15, 2006, which for the Company is January 1, 2007, and the provisions of FIN 48 will be applied to all tax positions accounted for under SFAS No. 109 upon initial adoption. The cumulative effect of applying the provisions of this interpretation will be reported as an adjustment to the opening balance of retained earnings for that fiscal year. The Company is currently evaluating the potential impact of the adoption of FIN 48 on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies where other accounting pronouncements require or permit fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company is January 1, 2008, and interim periods within those fiscal years. The Company is evaluating the impact this statement will have on its consolidated financial statements.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to be consistent with the current period presentation

3.   Real Estate Investments

As of December 31, 2006, the Company owned 75 student housing properties and had ownership interests in two student properties through a joint venture, located near 51 colleges and universities in 27 states. These properties contain an aggregate of 14,432 units and 46,696 beds. The Company’s investment in student housing properties at December 31, 2006 and 2005, which includes the two joint venture properties that were under development and placed into service during the third quarter of 2006 are as follows (in thousands):

	2006		2005
Land	$	168,579	$	110,634
Building and improvements	1,444,349		1,055,157
Residential furniture and appliances	44,902		26,159
Construction in Progress	1,592		18,305
	$	1,659,422	$	1,210,255

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

4.   Real Estate Acquisitions

2006 acquisitions

During the year ended December 31, 2006, the Company acquired 21 student housing properties and five undeveloped parcels of land with an aggregate of 3,904 units and 12,128 beds for an aggregate purchase price of approximately $409.7 million. These acquisitions were financed through the placement of $266.8 million of new mortgage debt on the properties; assumption of $46.5 million of existing mortgage debt and the remaining balance was financed through borrowings under the Company’s credit facilities. The Company ascribed $4.4 million of the aggregate purchase price to the fair value of the in-place leases acquired. The results of operations of these properties are included in the accompanying statements of operations as of the respective acquisition dates.

The following unaudited proforma results of operations reflect the 2006 acquisitions as if they had occurred on January 1, 2005 (in thousands):

	December 31,
	2006			2005
Pro forma revenue	$	322,117		$	277,089
Pro forma net (loss)income	$	(8,453	)	$	2,333
Pro forma EPS—Basic	$	(0.21	)	$	0.07
Pro forma EPS—Diluted	$	(0.21	)	$	0.07

2005 and 2004 acquisitions

During the year ended December 31, 2005, the Company acquired 24 student housing properties and three undeveloped parcels of land with an aggregate of 4,753 units and 14,302 beds for an aggregate purchase price of approximately $548.5 million. The Company ascribed $6.4 million of the aggregate purchase price to the fair value of in-place leases acquired. The results of operations are included in the accompanying statements of operations beginning on the respective acquisition dates.

Gary M. Holloway, Sr. and three other employees of the Company at the time, including two executive officers of the Company, and an employee of an entity owned by Mr. Holloway, held an ownership interest in two student housing properties that were acquired by the Company during the first quarter of 2005 for a total purchase price of $38.2 million. The Company paid $36.5 million in cash to investors in the selling entity not affiliated with the Company and issued a total of 141,549 units of limited partnership interest in the Operating Partnership to Mr. Holloway and these individuals with an aggregate fair value of $1.7 million in connection with the purchase. The fair value of the limited partnership units was based on the closing price of the Company’s common shares on the acquisition date. The fair value of the units of limited partnership interest was recorded as an increase to minority interest.

In connection with the acquisition of two other student housing properties in the second quarter of 2005, the Company issued a total of 1,940,282 units of limited partnership interest in the Operating Partnership to the sellers with an aggregate fair value of $26.9 million. The fair value of the limited partnership units was based on the closing price of the Company’s common shares on the acquisition date. The fair value of the units of limited partnership interest was recorded as an increase to minority interest.

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

4.Real Estate Acquisitions (Continued)

In August 2005, the Company entered into a joint venture with an institutional investor to develop and construct two student housing properties, located in Orono, Maine and Bowling Green, Ohio, with estimated aggregate costs of $43.4 million for acquiring, developing and constructing a total of 1,152 beds. The Company contributed land to the joint venture in exchange for its 10% interest and cash. In addition, the Company has the option to purchase the joint venture partner’s interest in the joint venture within one year of completion of the properties, and the Company has provided certain guarantees for a portion of the construction loans that are still outstanding. During 2006 and 2005 the Company capitalized interest costs of $1.2 million and $0.5 million, respectively. As such, the transaction is being accounted for as a financing arrangement, whereby the Company records the real estate as an asset, depreciates the property, and records a financing obligation. Construction was completed in August 2006.

The remaining acquisitions were financed through the placement of $210.9 million of new mortgage debt on the properties, assumption of $118.9 million in existing mortgage debt and the remaining balance was primarily financed through borrowings under the Company’s credit facilities.

During the year ended December 31, 2004, the Company acquired 30 student housing properties, and one undeveloped parcel of land for development as a student housing property, for an aggregate purchase price of $633.1 million. The results of operations of each of the acquired properties have been included in our statements of operations from the respective purchase dates.

The following unaudited pro forma financial information for the years ended December 31, 2005 and 2004 gives effect to the 2005 and 2004 student housing property acquisitions as if the transactions had occurred on January 1, 2004 (in thousands). The pro-forma financial information for the year ended December 31, 2004 includes the $33.2 million of profits interest expense.

	December 31,
	2005		2004
Pro forma revenue	$	255,159	$	200,942
Pro forma net income (loss)	$	7,675	$	(33,105	)
Pro forma EPS—Basic	$	0.19	—
Pro forma EPS—Diluted	$	0.18	—

5.   Investments in Military Housing Projects

We record our investments in joint ventures under our military housing projects in accordance with the equity method of accounting. Our investment is initially recorded at cost, and subsequently adjusted at each balance sheet date to an amount equal to what we would receive from the joint venture in the event that it were liquidated at net book value as of that date, and assuming that the proceeds from the liquidation are distributed in accordance with the terms of, and priority of returns set forth under, the joint venture’s operating agreement. The terms of the various agreements generally provide for the payment to the Company of an agreed upon preferred return on the Company’s invested capital and a return of the Company’s invested capital prior to the distribution of any amounts to the government entity that is a member of the joint venture.

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

5.Investments in Military Housing Projects (Continued)

As of December 31, 2006, we held a 10% and 9% ownership interest in eight and one, respectively, of the joint ventures that own and operate the military housing projects. As of December 31, 2006 we have invested capital in two of the joint ventures as discussed below.

The acquisition of our ownership interests in the joint venture that owns a 10% interest in Fort Carson Family, LLC and had the rights to exclusively negotiate the Fort Eustis/Fort Story military housing projects was recorded at fair value of the consideration paid in the amount of $31.0 million. The Fort Carson Family, LLC owns and operates the Fort Carson project. The underlying book value of the equity on the acquisition date was approximately $11.5 million. The remaining $19.5 million of this investment is being amortized based on the then current fiscal year revenue as a percentage of the estimated revenue to be earned over the remaining lives of the projects, which are 45 years for the Fort Carson project and 50 years for the Fort Eustis/Fort Story project. Amortization expense was $383,000, and $275,000 in 2006, and 2005, respectively.

The carrying value of the Company’s investment in Fort Carson Family Housing, LLC was $25.3 million at December 31, 2006 and $26.1 million at December 31, 2005. The Company is entitled to a preferred return on its investment in Fort Carson Family Housing LLC, plus 30% of the project’s net operating income. The project began repaying the Company’s equity investment in Fort Carson Family Housing LLC in July 2005. The equity investment is expected to be completely repaid by 2015. During 2006 and 2005, the Company received $3.1 million and $4.5 million respectively, of equity distributions from Fort Carson Family Housing LLC.

In November 2004, the Company and Benham Military Communities, LLC formed a joint venture known as GMH/Benham Military Communities LLC for the purpose of investing in the Navy Northeast Region military housing project. The Company contributed $9.5 million to GMH/Benham Military Communities LLC in return for a 90% interest and Benham Military Communities, LLC invested $1.1 million for the remaining 10% interest. The Company consolidates GMH/Benham Military Communities LLC as it has a 90% economic interest and controls a majority of the voting interests. Benham Military Communities, LLC’s 10% interest is accounted for as minority interest and is included in accrued expenses on the accompanying consolidated balance sheets at December 31, 2006 and 2005. In November 2004, GMH/Benham Military Communities, LLC invested $10.6 million for its 10% equity interest in Northeast Housing LLC, which owns and operates the Navy Northeast Region military housing project. GMH/Benham Military Communities LLC is entitled to a preferred return on its investment in Northeast Housing LLC. The preferred return will accrue, but not be paid, until the end of the initial development period for the project in October 2010. The carrying value of this investment was $12.7 million at December 31, 2006 and $11.7 million at December 31, 2005.

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

5.Investments in Military Housing Projects (Continued)

The following is a summary of the unaudited financial position of the unconsolidated military housing projects in which the Company had invested capital as of December 31, 2006 and 2005 (in thousands):

	December 31,
	2006		2005
Net property	$	331,066	$	353,447
Other assets	621,371		472,312
Liabilities	36,859		28,527
Debt	778,530		662,135
Equity	137,048		135,097
Company’s share of equity	19,146		18,605

The following is a summary of unaudited results of operations of the unconsolidated military housing projects in which the Company had invested capital as of December 31, 2006 and 2005 (in thousands):

	Year ended December 31,
	2006		2005
Revenue	$	101,493	$	111,319
Operating expenses	57,174		61,463
Interest expense, net	19,249		28,028
Depreciation and amortization	20,539		23,205
Net income	4,531		(1,377		)
Company’s equity income	3,523		3,073

6.   Income Taxes

The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. As a REIT, the Company generally is not subject to federal income tax (including alternative minimum tax) on net income that it currently distributes to its shareholders, provided that the Company satisfies certain organizational and operational requirements including the requirement to distribute at least 90 percent of its REIT taxable income to its shareholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. The Company is subject to certain state and local taxes.

The Company has elected to treat certain of its corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”). In general, a TRS of the Company may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities). A TRS is subject to corporate federal and state income tax. The TRS follows SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset and liability method. Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. The TRS has recorded a deferred tax asset of $436,000 and $741,000 in 2006 and 2005 which are included in other assets on the accompanying consolidated balance sheets, primarily relating to development fees

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

6.Income Taxes (Continued)

received and recognized for income tax purposes that have been deferred in the accompanying financial statements.

The provision for income taxes is comprised of the following for the years ended 2006 and 2005, and for the period November 2, 2004 to December 31, 2004 (in thousands):

	2006		2005			2004
Current federal	$	3,695	$	5,334		$	263
Current state	733		987			49
Total current	4,428		6,321			312
Deferred federal	256		(630		)	—
Deferred state	49		(111		)	—
Total deferred	305		(741		)	—
Provision for income tax expense	$	4,733	$	5,580		$	312

The provision for income taxes differs from the amount computed by applying the statutory income tax rate to income before provision for income taxes. The effective tax rate of the taxable REIT subsidiaries was 35.5% and 35.1% for the years ended December 31, 2006 and 2005, respectively and 24.9% for the period from November 2, 2004 to December 31, 2004. The Company’s effective tax rate is lower than the statutory tax rate as a result of permanent depreciation and amortization differences between income subject to income tax for book and tax purposes.

7.   Mortgage Notes Payable

The following table sets forth information regarding our mortgage indebtedness outstanding at December 31, 2006 and 2005 (in thousands):

	2006		2005
Fixed rate mortgages encumbered by student housing properties, bearing interest rates ranging from 4.03% to 6.19% at December 31, 2006, maturing at various dates through 2024, adjusted for unamortized net debt premium of $10.2 million	$	964,817	$	658,358
Variable rate mortgages encumbered by student housing properties we own and two in which we have an ownership interest through a joint venture, bearing interest rates ranging from 7.23% to 7.43% at December 31, 2006, maturing at various dates through 2015	57,773		33,711
Fixed rate mortgage encumbered by corporate office building bearing interest at 5.58%, requiring payments of interest only with balloon payment due in 2016	5,700		—
Total mortgage notes payable	$	1,028,290	$	692,069

The weighted-average interest rate on our mortgage notes payable was 5.18%, 4.97% and 4.65% during 2006, 2005 and 2004 respectively. As of December 31, 2006 and 2005, the net carrying value of the properties that are encumbered by mortgage indebtedness, including the two properties that we have an ownership interest in and our corporate office building was $1.433 billion and $1.013 billion, respectively.

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

7.Mortgage Notes Payable (Continued)

The table below sets forth for 2007, the five succeeding years and thereafter the aggregate annual principal payments of the above-referenced indebtedness (in thousands):

	Principal Amortization			Balloon Payments		Total
2007		$	5,541	$	40,828	$	46,369
2008		5,598		27,086		32,684
2009		5,170		39,872		45,042
2010		5,153		94,855		100,008
2011		5,247		90,318		95,565
2012 and thereafter		16,675		681,699		698,374
		$	43,384	$	974,658	$	1,018,042
Net debt premium						10,248
						$	1,028,290

8.   Line of Credit

New Line of credit

On October 2, 2006 the Company entered into a $250 million revolving line of credit with Wachovia Bank, National Association, as amended. In connection with this transaction, the Company incurred approximately $3.3 million of transaction costs that are being amortized over the term of the agreement. Borrowings under this line of credit were used to (i) repay all the obligations under the Former Credit Facility, as defined below, and (ii) fund the equity portion of the purchase price for our acquisition of a portfolio of eleven properties that closed in October 2006. Borrowings from the line of credit may be used for only those purposes approved by the lender. Upon entering into the line of credit, the lender pre-approved the following uses: (i) acquire or fund certain pending student housing acquisitions and military housing projects, and (ii) fund the third and fourth quarter distributions, other general working capital advances pursuant to the terms of the agreement, and such other transactions as may be approved by Wachovia in its sole and absolute discretion. The new line of credit had an initial term of six months, which was subsequently amended in February 2007 to extend the initial term through June 1, 2007, referred to as the Initial Maturity Date, and provides for either of two additional extension options: (i) an additional three-month extension through September 1, 2007, referred to as the Option One Maturity Date, in the event that we have entered into a definitive agreement relating to a merger or the sale of substantially all of our assets, provided such merger/sale agreement has been approved by our Board of Trustees, has been announced publicly and is not subject to financial contingencies; and (ii) an additional four-month extension option through October 2, 2007 (provided notice is given no later than fifteen days prior to the later of the Initial Maturity Date or the Option One Maturity Date), subject to payment of a fee in an amount equal to 2% of the outstanding principal balance of the line as of the Initial Maturity Date or the Option One Maturity Date, as the case may be (this extension right is referred to as the Option Two Maturity Extension). In no event, however, will the maturity date of the line of credit extend beyond October 2, 2007.

Borrowings under this new line of credit currently bear interest at a Eurodollar rate based on LIBOR plus 2% and LIBOR plus 4.5% during the Option Two Maturity Extension.

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Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

8.Line of Credit (Continued)

The Operating Partnership and several of its direct and indirect subsidiaries that own and operate the student housing properties, including third party management contracts and our military housing projects guarantee the indebtedness under the line of credit. These entities have granted a security interest in the entities that own, directly or indirectly, the student housing properties, our third party management business and the contracts, pursuant to which we receive management, development and renovation fees with respect to operation of its military housing projects.

The new line of credit contains affirmative and negative covenants and also contains financial covenants which, among other things, require that the Company maintain (i) a fixed charge coverage ratio with respect to the student housing properties, as defined in the line of credit agreement, of at least 1.25 to 1.00, (ii) a consolidated tangible net worth, as defined in the line of credit agreement, of at least $455 million, (iii) maintain quarterly minimum aggregate adjusted management EBITDA relating to the military housing segment and student housing managed properties, as defined in the line of credit agreement, of $5 million, and (iv) maintain the Company’s federal tax status as a REIT. As of December 31, 2006, the Company was in compliance with these debt covenants.

As of December 31, 2006, the Company had $199.4 million outstanding under the line of credit, bearing interest at a weighted-average rate of 7.35%, and an additional $50.6 million was available for draw under the facility under the terms and conditions referred to above.

Former Credit Facility

In November 2004, the Company entered into a $150 million three-year unsecured revolving credit facility, subject to increase to $250 million (the “Former Credit Facility”), with a consortium of banks. The Former Credit Facility was terminated and all outstanding borrowings were paid on October 2, 2006 with proceeds from the new line of credit, as described above. The Company wrote off approximately $1.1 million of deferred financing costs relating to the termination of the Former Credit Facility during the fourth quarter of 2006. The Former Credit Facility provided for the issuance of up to $20 million of letters of credit, which was included in the $150 million availability. During certain periods in 2006, the Company was not in compliance with certain of its debt covenants under the former credit facility. All such events of non compliance had been previously waived.

As of December 31, 2005, the weighted average interest rate on borrowings outstanding under the former Credit Facility was 6.5%.

9.   Transactions with Related Parties

Related Party Management and Other Services

In the ordinary course of its operations, the Company has on-going business relationships with Gary M. Holloway, Sr., entities affiliated with Mr. Holloway, and entities in which Mr. Holloway or the Company has an equity investment. The operating results or financial position of the Company and the GMH Predecessor Entities could be significantly different from those that would have been reported if the entities were autonomous. These relationships and related transactions are summarized below.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

9.Transactions with Related Parties (Continued)

In connection with the Company’s initial public offering, Mr. Holloway, and various entities wholly-owned by Mr. Holloway, entered into a Contribution Agreement, dated October 18, 2004, with the Operating Partnership. Pursuant to the Contribution Agreement, Mr. Holloway contributed to the Operating Partnership all of the partnership interests of 353 Associates, L.P., which entity’s sole asset was the corporate headquarters building located in Newtown Township, Pennsylvania. The Commonwealth of Pennsylvania and Newtown Township each impose a 1% transfer tax on the transfer of these partnership interests. Mr. Holloway paid the Company approximately $61,000 as reimbursement for one-half of the aggregate transfer tax that was originally paid for by the Company in connection with transfer tax assessed against the transfer of the partnership interests. The amount was received by the Company in 2006 from Mr. Holloway, and was recorded as a reduction to corporate assets on the Company balance sheet as of December 31, 2005.

Through the completion of the Company’s initial public offering on November 2, 2004, common costs for human resources, information technology, office equipment and furniture, and certain management personnel were allocated to the various entities owned or controlled by Mr. Holloway, including The GMH Predecessor Entities, using assumptions based on headcount that management believed were reasonable. During the period from January 1, 2004 to November 1, 2004, or such costs totaled $2.1 million and are included in administrative expenses in the accompanying combined statement of operations. Subsequent to November 2, 2004, such costs were incurred directly by the Operating Partnership. The allocation of such costs to other entities owned or controlled by Mr. Holloway during the years ended December 31, 2006 and 2005 and the period from November 2, 2004 to December 31, 2004 totaled $218,000, $318,000 and $47,000, respectively, and are reflected as expense reimbursements from related parties in the accompanying consolidated statements of operations.

The Company leases space in its corporate headquarters to entities wholly-owned by Mr. Holloway. During the years ended December 31, 2006 and 2005, rental income from these entities totaled $156,000 and $245,000, respectively, and during the period from November 2, 2004 to December 31, 2004, rental income from these entities totaled less than $0.1 million. These amounts are included in other property income in the accompanying consolidated and combined statements of operations.

The Company provided property management consulting services to GMH Capital Partners Asset Services, LP, an entity wholly-owned by Mr. Holloway, in connection with property management services that GMH Capital Partners Asset Services, LP performed during the year ended December 31, 2005 and for the period November 2, 2004 to December 31, 2004 relating to five student housing properties containing a total of 2,174 beds. The Company earned consulting fees equal to 80% of the net management fees that GMH Capital Partners Asset Services, LP earned for providing the property management services. For the year ended December 31, 2005 and for the period November 2, 2004 to December 31, 2004, such fees totaled $0.3 million and less than $0.1 million, respectively. As of January 1, 2006, the management agreements relating to four of these properties were assigned from GMH Capital Partners Asset Services, LP to a subsidiary of the Company, and the management agreement relating to the fifth property was terminated. As a result, no such consulting fees were earned by the Company during 2006.

The Company earned management fees from properties in which Mr. Holloway was an investor. During the years ended December 31, 2006 and 2005, the period from November 2, 2004 to December 31,

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

9.Transactions with Related Parties (Continued)

2004, and the period from January 1, 2004 to November 1, 2004, such income totaled $0.1 million, $0.2 million, $0.1 million, and $1.1 million, respectively. This property was sold during 2006.

The Company is reimbursed by the joint ventures relating to certain of its military housing projects in which the Company has an ownership interest, as well as student housing properties under the Company’s management in which Mr. Holloway was an investor through March 2005, for the cost of certain employees engaged in the daily operation of those military housing projects and student housing properties. The reimbursement of these costs is included in expense reimbursements—related party in the accompanying consolidated and combined statements of operations. During the year ended December 31, 2006 and 2005, the period from January 1, 2004 to November 1, 2004, and the period from November 2, 2004 to December 31, 2004, such expense reimbursements relating to these military housing projects and student housing properties totaled $64.0 million, $57.9 million, $19.5 million and $13.8 million, respectively.

The GMH Predecessor Entities previously paid management fees and reimbursed expenses to entities owned by Mr. Holloway that were not contributed to the Company in connection with its initial public offering. During the period from January 1, 2004 to November 1, 2004, the management fees and reimbursed expenses totaled less than $0.1 million.

Mr. Holloway owns Bryn Mawr Abstract, Inc., an entity that provides title abstract services to third party title insurance companies, from which we have purchased title insurance with respect to certain student housing properties and military housing projects that we have acquired or refinanced. In connection with the purchase of title insurance for these student housing properties and military housing projects, premiums were paid to other title insurance companies, which fees in some cases are fixed according to statute. From these premiums, the other title insurance companies paid to Bryn Mawr Abstract, Inc. $0.4 million, $0.3 million and $0.5 million during the years ended December 31, 2006, 2005 and 2004, respectively, for providing title abstract services.

Mr. Holloway owns GMH Capital Partners Commercial Realty LP, an entity that provides real estate consulting and brokerage services for real estate transactions. During the year ended December 31, 2005, GMH Capital Partners Commercial Realty LP received aggregate commissions of $0.3 million from the sellers of two student housing properties that the Company purchased. In addition, in connection with the Company’s Navy Northeast Region project, GMH Capital Partners Commercial Realty LP received brokerage service fees of $0.2 million during the year ended December 31, 2004, in connection with the sale of a land parcel by the Navy that was formerly part of the Company’s Navy Northeast Region project. No such payments were made during the year ended December 31, 2006.

In February 2005, the Company transferred its interest in Corporate Flight Services, LLC, including the corporate aircraft and associated debt initially contributed to the Operating Partnership at the time of the initial public offering, back to Mr. Holloway. Corporate Flight Services, LLC had a net deficit of $171,000, net of $180,000 tax expense related to the taxable gain upon the transfer to Mr. Holloway, on the date it was transferred back to Mr. Holloway. This transfer was accounted for as a capital contribution to additional paid-in capital. During the year ended December 31, 2006 and 2005, the Company paid Corporate Flight Services, LLC $993,000 and $290,000, respectively for use of an aircraft owned by Corporate Flight Services, LLC.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

9.Transactions with Related Parties (Continued)

Gary M. Holloway, Sr. and three other employees of the Company at the time, including two executive officers of the Company, and an employee of an entity wholly-owned by Mr. Holloway, held an ownership interest in two student housing properties that were acquired by the Company during the first quarter of 2005 for a total purchase price of $38.2 million. The Company paid $36.5 million in cash to investors in the selling entity not affiliated with the Company and issued a total of 141,549 units of limited partnership interest in the Operating Partnership to Mr. Holloway and these individuals with an aggregate fair value of $1.7 million in connection with the purchase.

Loan from General Electric Capital Corporation

During 2005, Denis J. Nayden, one of our trustees, served as a consultant to General Electric Company, which is the parent company of General Electric Capital Corporation. Prior to 2005, he served as a senior vice president of General Electric Company. As of December 31, 2005, we had outstanding mortgage indebtedness owed to General Electric Capital Corporation in an aggregate amount of $253.6 million secured by properties or other assets that we owned. Mr. Nayden ceased his consulting relationship with General Electric Company as of December 31, 2005.

10.   Profits Interests

In recognition of past services, certain employees of The GMH Predecessor Entities and other entities affiliated with Mr. Holloway were previously awarded profits interests by Mr. Holloway. These employees were eligible to participate in the net proceeds or value received by Mr. Holloway upon the sale or disposition of certain student housing properties and the military housing business in excess of Mr. Holloway’s equity investments in such assets. These employees rendered all services and satisfied all conditions necessary to earn the right to benefit from these profits interests as of the date that such profits interests were awarded. In accordance with SFAS No. 5, Accounting for Contingencies, compensation expense relating to the award of these profits interests was required to be recognized by The GMH Predecessor Entities when the sale or disposition of the assets resulting in proceeds received by Mr. Holloway in an amount in excess of his equity investment in such assets became probable. This amount became probable during the third quarter of 2004 when the remaining profits interests awards were amended to fix the value of such awards at $33.2 million to be paid to these employees unconditionally. Accordingly, we recognized compensation expense in this amount in the third quarter of 2004. Mr. Holloway’s obligations regarding the profits interests were satisfied upon the transfer to these employees of $33.2 million of units of limited partnership in the Operating Partnership owned by Mr. Holloway on November 2, 2004, the closing date of our initial public offering.

11.   Employee 401(k) Plan

Subsequent to the formation of the Operating Partnership, the Company established a tax deferred defined contribution 401(k) plan for its eligible employees. Participants may elect to defer a portion of their compensation by salary reduction. The Company’s contributions to the plan, which are based on a percentage of participant contributions, for the years ended December 31, 2006 and 2005 and the period from November 2, 2004 to December 31, 2004 totaled $0.2 million, $0.1 million and less than $0.1 million, respectively.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

11.Employee 401(k) Plan (Continued)

The GMH Predecessor Entities’ employees were eligible to participate in a multi-employer tax-deferred defined contribution 401(k) plan. Participants elected to defer a portion of their compensation by salary reduction. The GMH Predecessor Entities’ contributions to the plan, which were based on a percentage of participant contributions, amounted to $35,000 for the period from January 1, 2004 to November 1, 2004.

12.   Commitments and Contingencies

As of December 31, 2006, we had an agreement to acquire one student housing property and 14 undeveloped parcels of land, of which 13 parcels relate to one project, for an aggregate purchase price of $19.0 million and had placed deposits related to such planned acquisitions totaling $155,000.

With regard to military housing privatization projects, the Company is typically required to fund its portion of the equity commitment to the project’s joint venture after all other sources of funding for the project have been expended. With respect to the Company’s Navy Northeast Region project, however, the Company was required to fund the equity commitment at commencement of the project. In connection with finalizing the agreements with the DoD for the Company’s military housing projects, the Company has committed to contribute the following aggregate amounts as of December 31, 2006 (in thousands):

2007	$	7,830
2010	6,600
2011	12,510
2012	6,300
Total	$	33,240

In connection with the development, management, construction, and renovation agreements for certain of the military housing projects, the Company guarantees the completion of its obligations under the agreements. The guarantees require the Company to fund any costs in excess of the amounts budgeted in the underlying development, management, construction, and renovation agreements. The maximum exposure to the Company on these guarantees cannot be determined at this time. Management believes that these guarantees will not have a material adverse impact on the Company’s financial position or results of operations.

The Company has two ground leases with respect to two of its student housing properties, one of which expires on September1, 2051 and the other of which expires on October 31, 2054. Each ground lease provides for additional renewal terms. Aggregate annual payments under these ground leases are approximately $400,000.

As of December 31, 2006 the Company had employment agreements in place with each of its executive officers, of which two were executed in 2004 and three in 2006. Each employment agreement is for an initial three-year term and provides for base salaries aggregating $2.8 million over the next three years. The base salaries are increased annually effective January 1 of each year by a minimum amount equal to at least the percentage increase in the Consumer Price Index.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

12.Commitments and Contingencies (Continued)

On December 31, 2005, the Company and one of its executive officers entered into a separation agreement, pursuant to which the executive resigned from his position as an officer of the Company and effectively terminated his employment agreement with the Company. Under the terms of the separation agreement, the executive remained eligible for an incentive bonus award for the fiscal year 2005, which was paid to the executive in June 2006. In addition, the executive has agreed to remain subject to certain restrictive covenants contained in the employment agreement, including non-disclosure of confidential information, non-competition and non-solicitation of employees, assignment of intellectual property rights, and on-going cooperation with the Company in connection with pending matters. The Company and the executive separately executed a Consulting Agreement, dated January 1, 2006, pursuant to which the executive has agreed to provide consulting services to the Company for an initial term through May 31, 2007. The Company is paying the executive $25,000 per month during the term of the Consulting Agreement as compensation for his services, which is being charged to expense as incurred.

Under the provisions of FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34,” a guarantor is to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee. The Company enters into indemnification agreements in the ordinary course of business that are subject to the provisions of FIN 45. Under these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company believes the estimated fair value of these agreements is immaterial. Accordingly, there were no liabilities recorded for these agreements as of December 31, 2006 and 2005.

On April 5, 2006, the Company, Gary M. Holloway Sr., our Chairman, President and Chief Executive Officer, and Bradley W. Harris, our former Chief Financial Officer, were named as defendants in a class action complaint filed in United States District Court for the Eastern District of Pennsylvania, or the Court. The complaint provides that the Plaintiff has filed a federal class action on behalf of purchasers of the publicly traded securities of the Company between October 28, 2004 and March 10, 2006, referred to as the Class Period, seeking to pursue remedies under the Securities Act of 1933 and the Securities Exchange Act of 1934. Plaintiff alleges that defendants issued a series of false and misleading financial results regarding the Company to the market during the Class Period, and more specifically, failed to disclose: (1) that the Company’s earnings, net income and revenues were materially inflated and expenses were materially understated; (2) that the Company’s funds from operations were materially inflated; (3) that the Company lacked adequate internal controls; (4) that the Company’s reported financial results were in violation of generally accepted accounting principles, or GAAP; and (5) that as a result of the foregoing, the Company’s financial results were materially inflated at all relevant times. Plaintiff alleges claims under Section 11 of the Securities Act with respect to all of the defendants; Section 12(a)(2) of the Securities Act with respect to the Company; Section 15 of the Securities Act with respect to Mr. Holloway and Mr. Harris; Section 10(b) and Rule 10b-5 of the Exchange Act with respect to all of the defendants; and Section 20(a) of the Exchange Act with respect to Mr. Holloway and Mr. Harris.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

12.Commitments and Contingencies (Continued)

On April 11, 2006, April 20, 2006, April 27, 2006 and May 15, 2006, four additional class action complaints were filed with the Court against the defendants by separate law firms, and additional complaints may be filed in the near future until a class has been certified by the court. Each of these additional filed complaints alleges the same claims against the defendants as described above with respect to the complaint filed on April 5, 2006, except that the complaint filed on April 20, 2006 restricts the class period to purchasers of the publicly traded securities of the Company to the time period between May 5, 2005 and March 10, 2006.

On January 22, 2007, the court entered an order appointing two lead plaintiffs, as well as lead counsel and a liaison counsel. In addition, on that date, the court entered an order indicating that the lead plaintiffs shall file a consolidated complaint within 60 days of the date of the order and that defendants shall respond to the consolidated complaint within 60 days of service of such consolidated complaint. This order also stated that the parties shall not file any dispositive motions before attending a settlement conference with an assigned magistrate judge. Accordingly, the defendants do not expect to file a dispositive motion, such as a motion to dismiss the action, until a consolidated complaint has been filed and a settlement conference has taken place. The outcome of this litigation is uncertain, and while the Company believes that it has valid defenses to Plaintiff’s claims and intends to defend the class action lawsuit vigorously, no assurance can be given as to the outcome of this litigation. The Company has not established a reserve for these claims as it has not determined that a loss is probable nor is it able to reasonably estimate potential losses, if any, related to this lawsuits. An adverse outcome could have a material adverse effect on our consolidated financial position and results of operations.

In addition, on March 12, 2007, the sellers of a portfolio of student housing properties that we acquired in June 2005, and who received units of limited partnership interests in our operating partnership in connection with the transaction, filed a lawsuit against the Company for securities fraud relating to our sale of the partnership interests. The sellers have alleged similar claims to those asserted in the Company’s pending class action litigation described above, including that the Company provided false and misleading financial results in connection with the offer and sale of the partnership interests. In connection with the acquisition of the portfolio, the Company purchased four student housing properties in exchange for a combination of cash, assumption of debt and units of limited partnership interests at a total value of approximately $76.8 million. The units of limited partnership interest were issued for a total value of approximately $27.5 million or $14.17 per unit of limited partnership interest. The outcome of this litigation is uncertain; and while the Company believes it has valid defenses to the claims and will defend itself vigorously, no assurance could be given as to the outcome of this litigation. The Company has not established a reserve for this claim as it has not determined that a loss is probable nor is it able to reasonably estimate potential losses, if any, related to these lawsuit. An adverse outcome could have a material adverse effect on the Company’s consolidated financial position and results of operations.

The Company also is subject to other routine litigation, claims and administrative proceedings arising in the ordinary course of business. The maximum exposure to the Company relating to these matters cannot be determined at this time. Management believes that the disposition of these routine litigation matters will not have a material adverse impact on the Company’s financial position or results of operations.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

13.   Segment Reporting

The Company is managed as individual entities that comprise four reportable segments: (1) student housing—owned properties (2) student housing management (3) military housing and (4) corporate. The operating results of our student housing owned properties and student housing management which included our acquisitions department had been previously classified as one segment. The acquisition department is now included in the corporate segment. The segment data for 2005 and 2004 have been restated to conform with the current year presentation. The other segment also includes the corporate overhead and other service departments. The Company’s management evaluates each segment’s performance based upon net income. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. (dollars in thousands)

	2006
	Student Housing— Owned Properties			Student Housing Management				Military Housing		Corporate			Eliminations				Total
Revenue:
Rent and other property income	$	188,885			$	—		$	—	$	156			$	—		$	189,041
Expense reimbursements:
Related party	—				390			63,622		218				—			64,230
Third party	—				6,013			—		—				—			6,013
Management fees:
Management fees—owned properties	—				7,290			—		—				(7,290		)	—
Related party	—				93			8,388		—				—			8,481
Third party	—				3,167			—		—				—			3,167
Other fee income-related party	—				—			21,635		—				—			21,635
Other income	225				35			72		232				—			564
Total revenue	189,110				16,988			93,717		606				(7,290		)	293,131
Operating Expenses:
Property operating expense	74,927				6,516			6,402		—				—			87,845
Intercompany management fees	7,290				—			—		—				(7,290		)	—
Reimbursed expenses	—				6,403			63,622		218				—			70,243
Real estate taxes	17,913				—			—		97				—			18,010
Administrative expenses	—				—			—		17,682				—			17,682
Audit Committee and Special Committee Expenses	—				—			—		7,821				—			7,821
Profits interest and employee initial public offering bonus expense	—				—			—		—				—			—
Depreciation and amortization	42,984				—			444		402				—			43,830
Interest	50,251				—			—		5,082				—			55,333
Total operating expenses	193,365				12,919			70,468		31,302				(7,290		)	300,764
(Loss) income before equity in earnings of unconsolidated entities, minority interest and income taxes	(4,255		)		4,069			23,249		(30,696		)		—			(7,633		)
Equity in earnings of unconsolidated entities	—				—			3,523		—				—			3,523
(Loss) income before minority interest and income taxes	(4,255		)		4,069			26,772		(30,696		)		—			(4,110		)
Income tax expense (benefit)	—				(337		)	5,070		—				—			4,733
(Loss) income before minority interest	(4,255		)		4,406			21,702		(30,696		)		—			(8,843		)
Minority interest	—				—			—		(3,857		)		—			(3,857		)
Net (loss)income	$	(4,255	)		$	4,406		$	21,702	$	(26,839	)		$	—		$	(4,986	)

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

13.Segment Reporting (Continued)

	2005
	Student Housing— Owned Properties		Student Housing Management			Military Housing		Corporate			Eliminations				Total
Revenue:
Rent and other property income	$	131,849		$	—	$	—	$	245			$	—		$	132,094
Expense reimbursements:
Related party	—			176		57,436		318				—			57,930
Third party	—			4,650		—		—				—			4,650
Management fees:
Management fees—owned properties	—			5,141		—		—				(5,141		)	—
Related party	—			197		6,808		—				—			7,005
Third party	—			3,774		—		—				—			3,774
Other fee income-related party	—			290		18,000		31				—			18,321
Other income	123			19		108		128				—			378
Total revenue	131,972			14,247		82,352		722				(5,141		)	224,152
Operating Expenses:
Property operating expense	48,992			4,196		4,431		—				—			57,619
Intercompany management fees	5,141			—		—		—				(5,141		)	—
Reimbursed expenses	—			4,826		57,436		318				—			62,580
Real estate taxes	12,191			—		—		—				—			12,191
Administrative expenses	—			—		—		12,254				—			12,254
Audit Committee and Special Committee Expense	—			—		—		—				—			—
Profits interest and employee initial public offering bonus expense	—			—		—		—				—			—
Depreciation and amortization	33,369			—		299		520				—			34,188
Interest	29,493			—		—		1,532				—			31,025
Total operating expenses	129,186			9,022		62,166		14,624				(5,141		)	209,857
Income (loss) before equity in earnings of unconsolidated entities, minority interest and income taxes	2,786			5,225		20,186		(13,902		)		—			14,295
Equity in earnings of unconsolidated entities	—			—		3,073		—				—			3,073
Income (loss) before minority interest and income taxes	2,786			5,225		23,259		(13,902		)		—			17,368
Income tax expense	—			66		5,514		—				—			5,580
Income (loss) before minority interest	2,786			5,159		17,745		(13,902		)		—			11,788
Minority interest	—			—		—		5,729				—			5,729
Net income	$	2,786		$	5,159	$	17,745	$	(19,631	)		$	—		$	6,059

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

13.Segment Reporting (Continued)

	2004 and Predecessor Companies
	Student Housing— Owned Properties			Student Housing Management			Military Housing		Corporate			Eliminations				Total
Revenue:
Rent and other property income		$	25,251		$	—	$	—	$	399			$	—		$	25,650
Expense reimbursements:
Related party		—			1,140		31,822		347				—			33,309
Third party		—			7,203		—		—				—			7,203
Management fees:
Management fees—owned properties		—			1,028		—		—				(1,028		)	—
Related party		—			1,458		2,897		—				—			4,355
Third party		—			3,986		—		—				—			3,986
Other fee income-related party		—			—		8,460		—				—			8,460
Other income		34			92		393		396				—			915
Total revenue		25,285			14,907		43,572		1,142				(1,028		)	83,878
Operating Expenses:
Property operating expenses		9,420			5,271		6,497		—				—			21,188
Intercompany management fees		1,028			—		—		—				(1,028		)	—
Reimbursed expenses		—			8,343		31,822		347				—			40,512
Real estate taxes		1,887			—		—		—				—			1,887
Administrative expenses		—			—		—		6,006				—			6,006
Profits interest and employee initial public offering bonus expense		—			—		—		37,502				—			37,502
Depreciation and amortization		6,214			—		25		915				—			7,154
Interest		5,579			—		—		493				—			6,072
Total operating expenses		24,128			13,614		38,344		45,263				(1,028		)	120,321
Income (loss) before equity in earnings of unconsolidated entities and income taxes		1,157			1,293		5,228		(44,121		)		—			(36,443		)
Equity in earnings of unconsolidated entities		—			—		—		—				—			—
Income (loss) before income taxes		1,157			1,293		5,228		(44,121		)		—			(36,443		)
Income taxes		—			33		279		—				—			312
Income (loss) before minority interest		1,157			1,260		4,949		(44,121		)		—			(36,755		)
Minority interest		—			—		—		247				—			247
Net income (loss)		$	1,157		$	1,260	$	4,949	$	(44,368	)		—			$	(37,002	)

	Student Housing		Student Housing Management			Military Housing			Corporate		Total
As of December 31, 2006:
Total assets	$	1,619,776		$	2,560	$	58,714		$	32,940	$	1,713,990
Total liabilities	$	1,087,819		$	4,435	$	(16,551	)	$	223,015	$	1,298,718
As of December 31, 2005:
Total assets	$	1,142,563		$	63,992	$	59,242		$	12,154	$	1,277,951
Total liabilities	$	722,105		$	47,364	$	(3,682	)	$	26,665	$	792,452

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

14.Equity Incentive Plan

In November 2004, the Company established an equity incentive plan (the “Plan”) that provides for the issuance of up to 2,000,000 common shares pursuant to options, restricted share awards, share appreciation rights, performance units and other equity based awards, of which 1,916,090 were available for grant at December 31, 2006. As of December 31, 2006, the Company issued 83,910 restricted common shares under the Plan to non-employee members of the Company’s Board of Trustees and to an executive officer of the Company. The restricted common shares vest over a three-year period from the grant date. The restricted common shares are entitled to the same dividend and voting rights during the vesting period as the issued and outstanding common shares. The fair value of the awards was calculated based on the closing market price of the Company’s common shares on the grant date and is expensed on a straight-line basis over the vesting period.

In 2006 and 2005, the Company recognized non-cash stock-based compensation expense related to the restricted common shares of $260,000 and $131,000, respectively. The Company did not issue any shares under the Plan in 2004.

The following table presents unvested restricted share activity during the year ended December 31, 2006:

	Unvested Number of  Restricted Shares			Weighted Average  Grant—Date Fair Value
Unvested at December 31, 2005		26,854			$	13.40
Granted		50,056			$	13.28
Vested and distributed		(11,285	)		$	13.32
Forfeited		—			—
Unvested at December 31, 2006		65,625			$	13.32

As of December 31, 2006, there was $724,000 of total unrecognized compensation cost related to future service periods for unvested restricted common shares, which is expected to be recognized once the remaining vesting periods have lapsed.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

15.Earnings Per Share

The following table details the number of shares and net income used to calculate basic and diluted earnings per share for the years ended December 31, 2006 and 2005 and for the period from November 2, 2004 to December 31, 2004 (in thousands, except share and per share amounts):

	Year Ended December 31, 2006						Year Ended December 31, 2005				Period from November 2, 2004 To December 31, 2004
	Basic			Diluted			Basic		Diluted		Basic		Diluted
Net (loss) income	$	(4,986	)	$	(4,986	)	$	6,059	$	6,059	$	251		$	251
Minority interest	—			(3,857		)	—		5,729		—			247
(Loss) income available to common shareholders	$	(4,986	)	$	(8,843	)	$	6,059	$	11,788	$	251		$	498
Weighted-average common shares outstanding	40,889,508			40,889,508			32,623,564		32,623,564		29,965,418			29,965,418
Warrant	—			818,100			—		2,340,761		—			1,721,726
Units of limited partnership held by minority interest holders	—			31,625,283			—		30,639,345		—			29,545,486
Restricted common shares	—			12,104			—		5,682		—			—
Total weighted-average shares outstanding	40,889,508			73,344,995			32,623,564		65,609,352		29,965,418			61,232,630
(Loss) earnings per common share	$	(0.12	)	$	(0.12	)	$	0.19	$	0.18	$	0.01		$	0.01

16.Summary of Quarterly Results (unaudited)

The following tables summarize the quarterly financial data for the years ended December 31, 2006 and 2005:

	2006
	1st Quarter		2nd Quarter			3rd Quarter			4th Quarter			Total
Total revenue	$	66,571	$	71,479		$	73,648		$	81,433		$	293,131
Net income (loss)	$	1,140	$	(541	)	$	(4,292	)	$	(1,293	)	$	(4,986	)
Basic earnings (loss) per common share	$	0.03	$	(0.01	)	$	(0.10	)	$	(0.03	)	$	(0.12	)
Diluted earnings (loss) per common share	$	0.03	$	(0.01	)	$	(0.10	)	$	(0.03	)	$	(0.12	)

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES
Notes to Consolidated and Combined Financial Statements (Continued)
December 31, 2006

16.Summary of Quarterly Results (unaudited) (Continued)

During the first, second, third and fourth quarters of 2006, the Company incurred $2.6 million, $2.3 million, $1.8 million and $1.1 million of costs, respectively, associated with the Audit Committee investigation which commenced during the first quarter of 2006 and the Special Committee fees associated with the activities of the Special Committee to explore strategic alternatives for the Company which was disbanded in December 2006. In addition, during the fourth quarter, the Company wrote-off approximately $1.1 million of deferred financing costs associated with the termination of the $150 million credit facility.

	2005
	1st Quarter		2nd Quarter		3rd Quarter			4th Quarter		Total
Total revenue	$	40,972	$	49,661	$	65,146		$	68,373	$	224,152
Net income (loss)	$	1,445	$	826	$	(32	)	$	3,820	$	6,059
Basic earnings per common share	$	0.05	$	0.03	$	0.00		$	0.10	$	0.19
Diluted earnings per common share	$	0.05	$	0.03	$	0.00		$	0.10	$	0.18

17.Subsequent Events

On January 26, 2007, we acquired a 50.1-acre land parcel located adjacent to a currently-owned student housing property located in Lincoln, Nebraska and serving the University of Nebraska, for total consideration of approximately $1.2 million.

On February 6, 2007, we closed on the Air Education and Training Command (“AETC”) Group I project with the Department of the Air Force. This military housing privatization project covers four bases and 2,875 end-state housing units. The AETC Group I project represents our first military housing project with the Department of the Air Force. The 50-year term of the project commences with a five-year Initial Development Period (“IDP”) that includes the design, construction, and/or renovation of, as well as the overall management and operational responsibilities over the end-state housing units. We invested $8.0 million for our 80% interest in the partnership that owns the rights to the AETC Group I project.

On February 28, 2007, we completed the refinancing of four currently-owned student housing properties. Under the refinancing, the Company placed an aggregate of $90.0 million in mortgage indebtedness covering the four properties, with each loan having a 10-year interest-only term and bearing a fixed interest rate of 5.6%. As a result of the refinancing, the Company realized net proceeds of $73.6 million, after repayment of existing mortgage loans, payment of prepayment penalties and closing costs. These net proceeds were used to repay an equal portion of the outstanding indebtedness under the Company’s line of credit.

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Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) as of December 31, 2006. Based upon the evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of December 31, 2006 were functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

(b)Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i)    pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii)   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii)  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the Company’s internal control over financial reporting as of December 31, 2006, using the framework specified in Internal Control—Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2006.

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The attestation report concerning management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, issued by Reznick Group, P.C., our independent auditors, appears in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2006.

Remediation of Prior Year Material Weaknesses

As previously disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the SEC on July 31, 2006, management concluded that its internal control over financial reporting was not effective as of December 31, 2005. Throughout 2006, and primarily during the second half of 2006, the Company completed significant remediation efforts to enhance both entity level controls as well as process and transaction level controls.

Entity-wide controls

Tone at the top established by members of senior management

The investigation initiated by the Company’s Audit Committee during the first quarter of 2006 found that senior members of our management exerted significant pressure on the Company’s former Chief Financial Officer and other accounting personnel. In response to this investigation, during the first and second quarters of fiscal 2006, the Audit Committee in conjunction with other members of the Board of Trustees held extensive discussions with senior management regarding the Company’s control environment and the need to establish an appropriate tone-at-the-top. These discussions were supplemented with mandatory training for all of senior management held during the fourth quarter of 2006, which was provided by a third-party which focuses on SEC filing and reporting requirements as well as public company oversight and responsibilities.

In addition to the remediation efforts implemented during the first and second quarters of 2006 as discussed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2005, the Company conducted a formal “tone at the top” survey during the third quarter of 2006, under the direction of the Company’s Audit Committee. The survey was distributed to a wide group of employees involved in operations, including accounting personnel, and results were compiled by independent counsel to the Audit Committee. During the fourth quarter of fiscal 2006, the Audit Committee reviewed the results of the survey and concluded that no significant tone-at-the top concerns were present as of the survey date. Management is currently considering the feedback obtained in the survey for continued design and implementation of tone-at-the top programs. A similar survey is expected to be conducted on an annual basis.

Sufficient personnel in our accounting department with requisite skills and competencies

Effective July 1, 2006, the Company hired an Executive Vice President and Chief Financial Officer, J. Patrick O’Grady, with substantive credentials and requisite experience. In the last six months of the year, Mr. O’Grady assessed the competencies of the accounting department and has made the following changes:

·Hired additional key personnel including, among others, a corporate controller, military housing segment controller, and military housing segment assistant controller.

·Examined existing policies and procedures to identify areas where more explicit guidance was required, clarified policies and procedures with the accounting team and related operations personnel, and as of December 31, 2006, was in the process of establishing a plan for formalized modification in 2007.

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·Created a process through which all new, non-routine transactions within each of the Company’s business segments are evaluated against generally accepted accounting principals, documented, and approved by the Chief Financial Officer.

·Assessed existing processes and controls to validate existence and made revisions necessary to streamline and improve communication and accountability by appropriate accounting personnel.

·Increased staffing levels in 2006 hiring additional permanent and temporary personnel qualified to prepare and review financial results and transactions.

Adequate monitoring and information and communication controls

The hiring of key accounting personnel with requisite skills and competencies in conjunction with training of senior management, discussed above, created an organization structure that facilitated the necessary information flow to enable the Company to monitor its business activities effectively. In the third and fourth quarters of fiscal 2006, senior management met at least twice per month to discuss strategic activities and business risks, and to review the financial results of the current period. In addition, various monitoring activities including property level variance analyses, financial close checklists, and certification mechanisms were developed, monitored, and approved on a timely basis.

During the second quarter of fiscal 2006, senior management, in conjunction with the Audit Committee, reviewed the Company’s Code of Business Conduct and Ethics and ensured that all employees, including new hires and senior management, re-affirmed their understanding of this Code and signed a statement to that effect.

Furthermore, the newly hired Chief Financial Officer, in conjunction with the Chief Executive Officer, established a protocol requiring that the Chief Financial Officer or his designee participate at the onset of discussions for all significant transactions to review the appropriate accounting treatment in accordance with generally accepted accounting principles. This protocol is evidenced by accounting treatment memorandums reviewed and approved by appropriate accounting personnel prior to consummation of each significant transaction.

Process and Transaction Level Controls

Revenue Recognition:   Within our student housing segment, we implemented a process through which leases are reconciled to occupants at the beginning of the new academic year. Subsequent to this reconciliation, the student housing controller and property managers complete a variance analysis to monitor significant changes in occupancy levels and leases. Furthermore, the Company monitors all student housing receivables open for greater than 60 days and records the appropriate reserve, in accordance with our policy, for these receivables.

Purchasing and Accounts Payable:   Throughout the third and fourth quarters of 2006, we implemented a policy requiring property managers and regional vice presidents to report and certify that they submitted all information related to expenses for goods and services received but not yet invoiced as of the end of each month. In addition, the Company monitors the activity of the properties through monthly conference calls with the property managers and regional vice presidents to determine the appropriate level of accrued liabilities to record.

Capital spending and maintenance.   During the third quarter of fiscal 2006, we implemented a policy requiring generation, review and approval of a detailed capital spending analysis each month for each property and functional department. These analyses, along with the depreciation/amortization analysis and journal entries, are reviewed and approved, in accordance with our capitalization policy, by the student housing controller and our corporate controller in conjunction with the period end financial reporting process.

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Real estate acquisitions.   During the second quarter of fiscal 2006, we established a policy requiring that all acquisitions of student housing properties be recorded at their fair market value based on valuations performed by professional land surveyors and property estimates. Appraisals by third party professionals were obtained during the due diligence process and were the basis for the allocation of the purchase price of each property. Timely review and approval by the investment committee, cross-functional due diligence team, and the Board of Trustees occurred for each acquisition. Capital assets, and costs to be capitalized in connection with acquisition transactions, were identified, recorded, depreciated/amortized and continue to be monitored in compliance with the agreed upon investment documents and capital budgets approved by the various parties.

Period-end financial reporting.   We improved our monthly close procedures and controls in each of the reporting divisions to facilitate the timely reporting of financial statements in accordance with generally accepted accounting principals through the application of consistent, formalized, close procedures and the routine analysis of accounts. Newly implemented and monitored controls include:

·review and documented approval of recurring and non-recurring journal entries,

·preparation and documented review of significant account reconciliations,

·the completion of review checklists for close and other critical month-end procedures, and,

·analysis and documented review of accounts at the property and consolidated levels.

Furthermore, we have implemented controls for the preparation of the external financial statements prepared during the quarters and at year end. These include the establishment of no less than bi-monthly executive and accounting department meetings to discuss results and potential issues in the business and internal control procedures, review and evidence of approval of the results and position of each of our segments by its respective controller, and enforcement of the adherence to the internal control procedures documented by the Company.

As of December 31, 2006, we substantially completed the execution of our remediation plan, evaluated and tested the effectiveness of these controls as of December 31, 2006 and determined that the prior year control deficiencies have been remediated effectively.

Management’s assessment of the effectiveness of internal control over financial reporting has been audited by Reznick Group, P.C., our independent registered public accounting firm. Their report appears below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and
Shareholders of GMH Communities Trust

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that GMH Communities Trust maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). GMH Communities Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in

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all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that GMH Communities Trust maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, GMH Communities Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet and the related consolidated statements of operations, beneficiaries’ equity, and cash flows of GMH Communities Trust, and our report dated March 14, 2007 expressed an unqualified opinion.

/s/ Reznick Group, P.C.

Baltimore, Maryland
March 14, 2007

(c)Changes in Internal Control Over Financial Reporting

Other than the remediation steps described above, there have been no changes in our internal control over financial reporting during the fourth quarter of fiscal 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.Other Information.

None.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance.

Our Trustees and Executive Officers

Our business and affairs are managed under the direction of our Board of Trustees. Our Board of Trustees consists of nine members. We believe Messrs. Buchholz, Eastwood, Kessler, Nayden and Silfen meet the independence requirements of the New York Stock Exchange, or NYSE. Our board is responsible for determining independence. Our shareholders elect our trustees annually and our trustees serve and hold office until our next annual shareholder meeting and until their successors are duly elected and qualify except as otherwise described below. All executive officers are elected by the Board of Trustees to serve in their respective capacities until their successors are elected and qualified or until their earlier resignation or removal. The following table sets forth certain information regarding our executive officers and trustees:

Name	Age		Title
Gary M. Holloway, Sr.(1)		51	Chairman, President and Chief Executive Officer
Bruce F. Robinson(1)		51	President of Military Housing Business and Trustee
Frederick F. Buchholz		61	Trustee
RADM James W. Eastwood		61	Trustee
Michael D. Fascitelli(2)		50	Trustee
Steven J. Kessler		64	Trustee
Denis J. Nayden		52	Trustee
Dennis J. O’Leary(1)		59	Trustee
Richard A. Silfen		43	Trustee
John DeRiggi		40	President of Student Housing Business and Chief Investment Officer
J. Patrick O’Grady		46	Executive Vice President and Chief Financial Officer
Joseph M. Macchione		41	Executive Vice President, General Counsel and Secretary

(1)Gary M. Holloway, Sr. designated each of these individuals for nomination to our Board pursuant to his right to nominate up to three trustees under the terms of his employment agreement. Mr. O’Leary served as our Interim Chief Financial Officer from March 31, 2006 through July 1, 2006, at which time he became an Executive Vice President and retained the position of principal financial officer. On August 15, 2006, Mr. O’Leary ceased to be an employee of the Company.

(2)Vornado Realty L.P., the operating partnership of Vornado Realty Trust, has designated this individual pursuant to its right to designate for nomination to our Board a trustee under the terms of the warrant it received in connection with our formation transactions.

Messrs. Holloway and Robinson have served as trustees since the initial formation of GMH Communities Trust in May 2004. The other trustees have served as trustees since October 28, 2004, the date on which our common shares were first publicly traded on the New York Stock Exchange, except that Mr. Fascitelli was appointed to our Board of Trustees on August 10, 2005.

Gary M. Holloway, Sr. is our chairman, president and chief executive officer. Since 1985 and prior to our initial public offering, Mr. Holloway founded and operated GMH Associates, our predecessor entities and other affiliated entities, as a fully integrated and diverse real estate company with divisions specializing in the student and military housing industries, as well as the commercial real estate and investment services sectors. Under Mr. Holloway’s direction, GMH Associates has acquired, built, managed and expanded residential and commercial properties throughout the U.S. since its inception. Prior to the formation of GMH Associates, Mr. Holloway was involved in various aspects of the real estate industry. He served as

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chief financial officer for the Holloway Corporation, a closely held business that specialized in residential and senior housing developments, and began his career with Touche Ross & Co., Certified Public Accountants, where he provided accounting and tax services to real estate clients.

Bruce F. Robinson is president of our military housing division, GMH Military Housing, a military housing company which provides development, management, and construction/renovation services for housing located on military bases throughout the United States. In addition, he manages our military joint venture and partner relationships. Prior to joining the military division, Mr. Robinson directed GMH Capital Partners, LP, an international corporate real estate company. During his tenure at the firm, which began in 1986, he has been a key participant in the formation and operation of all entity structures as well as financing issues, due diligence and global planning. Prior to joining GMH Associates, he was a senior tax manager for Touche Ross & Co., Certified Public Accountants, where he specialized in real estate syndication, partnerships and corporate acquisitions.

Frederick F. Buchholz worked with Lend Lease Real Estate investments or its predecessors from 1968 until retiring in June 1998. Since his retirement, Mr. Buchholz has served as an independent real estate consultant. He was appointed senior vice president of Equitable Real Estate in December 1990 and executive vice president in 1992. Prior to his retirement, Mr. Buchholz was the officer in charge of the Lend Lease Philadelphia region, supervising new business, asset management and restructuring/workout activities on behalf of a total mortgage and equity portfolio exceeding $2.5 billion. At various times, Mr. Buchholz was also the officer in charge of Equitable Real Estate’s New York and Washington, D.C. regional offices. Mr. Buchholz is a member of the Board of Trustees of Liberty Property Trust, and is a member of the Appraisal Institute and the Investment Review Committee of the Delaware Valley Real Estate Investment Fund, L.P.

RADM James W. Eastwood (Ret) is chairman of Granary Associates, a project management, architectural, interior design and real estate development firm, a position he has held since 1990. Admiral Eastwood became executive vice president of Granary Associates in 1983, served as president from 1990 through 2004, and led the company through extraordinary growth and expansion in the healthcare, public and corporate sectors. He retired from the Naval Reserves in November 2001 as a Two Star Admiral having completed his final tour as Deputy, Vice-Commander, Commander-in-Chief Atlantic Fleet. Admiral Eastwood also serves on the board of directors of First Penn Bank. Admiral Eastwood is an NROTC graduate of Villanova University with a Bachelor of Engineering degree.

Michael D. Fascitelli has been president of Vornado Realty Trust since December 1996. Vornado Realty Trust is a NYSE-listed real estate investment trust that currently owns and manages approximately 87 million square feet of commercial real estate in the U.S. Mr. Fascitelli also currently serves as the president of Alexander’s Inc. Prior to his employment with Vornado Realty Trust, Mr. Fascitelli was a partner at Goldman, Sachs & Co., where he was head of the firm’s real estate investment banking business. Mr. Fascitelli currently serves on the boards of Vornado Realty Trust, Alexander’s Inc., and Toys “R” Us, Inc. Mr. Fascitelli received a Bachelor of Science in industrial engineering from the University of Rhode Island in 1978 and his MBA from the Harvard Graduate School of Business Administration in 1982.

Steven J. Kessler has been an executive vice president and the chief financial officer of Resource America, Inc., an asset management company that specializes in real estate, financial fund management and commercial finance since 2005, and served as senior vice president from 1997 to the present. From March 2005 to September 2005, he served as chief financial officer, and since September 2005 he has served as senior vice president, of Resource Capital Corp., a NYSE-listed specialty finance REIT that is externally managed by an indirect, wholly-owned subsidiary of Resource America, Inc. In addition, from 2002 to 2004, Mr. Kessler served as the chief financial officer of Atlas Pipeline Partners, L.P., a NYSE-listed master limited partnership. Prior to that, Mr. Kessler was vice president-finance and acquisitions at

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Kravco Company from March 1994 until 1997. From 1983 through March 1994, Mr. Kessler was chief financial officer and chief operating officer at Strouse Greenberg & Co., Inc., a regional full service real estate company, and vice president-finance and chief accounting officer at its successor, The Rubin Organization. Prior thereto, Mr. Kessler was a partner at Touche Ross & Co., Certified Public Accountants. Mr. Kessler received a Bachelor of Science degree in accounting from Temple University in 1965 and became a certified public accountant in 1967.

Denis J. Nayden was a senior vice president of General Electric Company and is the former chairman and chief executive officer of GE Capital Corporation. Mr. Nayden joined GE Capital as marketing administrator for Air/Rail Financing in 1977, and in 1986 joined the Corporate Finance Group as vice president and general manager. In 1987, he was appointed senior vice president and general manager of the Structured Finance Group, and executive vice president of GE Capital in 1989. Mr. Nayden was named president and chief operating officer of GE Capital in 1994, and chairman and chief executive officer of GE Capital in June 2000. Currently, Mr. Nayden serves as Senior Advisor and Managing Partner of the Oak Hill Partners, L.P., a private investment group. He also is a Member of Alix Partners Holdings/Questor Partners Holdings Advisory Board, and serves on the boards of Accretive Healthcare Services, Inc., DuaneReade, Inc. and Gecis Global Holdings. Mr. Nayden received his Bachelor of Arts in English and his MBA in Finance from the University of Connecticut in 1976 and 1977, respectively.

Dennis J. O’Leary served as our interim Chief Financial Officer from March 31, 2006 through June 30, 2006. Effective as of July 1, 2006, Mr. O’Leary’s position with the Company became Executive Vice President and Principal Financial Officer. Mr. O’Leary ceased to be an employee of the Company on August 15, 2006 after the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006. Mr. O’Leary has been an independent consultant and a private investor since January 2004, working as a consultant to GMH Communities Trust and its predecessor entities on financial, structuring and compensation matters since March 2004. He was a partner with Ernst & Young LLP during 2002 and 2003, heading up the firm’s New York Region—Insurance Tax Practice. From 1985 to 2001, Mr. O’Leary was a senior vice president with Reliance Group Holdings, Inc. where he was responsible for worldwide tax planning. Prior to that time, he was a partner with Touche Ross & Co, Certified Public Accountants. Mr. O’Leary received his Bachelor of Arts in Economics from LaSalle University in 1970 and an MBA in Accounting and Finance from Temple University in 1973. He became a certified public accountant in 1974.

Richard A. Silfen has been a partner of the law firm of Duane Morris LLP, based in its Philadelphia, PA office, since January 2007. Prior to that time, he served as president and chief financial officer of Cangen Biotechnologies, Inc., a biotechnology company developing molecular diagnostic tests for the early detection of cancer and other technologies designed to enhance the selection of cancer therapeutic regimes, from September 2004 through July 2006. From May 2000 until August 2004, Mr. Silfen was a partner of the law firm of Morgan, Lewis & Bockius LLP. Mr. Silfen has extensive experience counseling real estate investment trusts and other publicly traded companies in connection with capital raising transactions and other securities matters, as well as mergers and acquisitions and other business and financial matters. He is also a member of the National Association of Real Estate Investment Trusts. Prior to May 2000, Mr. Silfen was a partner of the law firm of Wolf, Block, Schorr and Solis-Cohen LLP and was vice chairman of its corporate department. From 1987 through 1990, Mr. Silfen worked in the Securities and Exchange Commission’s Division of Corporation Finance. Mr. Silfen received his Bachelor of Arts in Physics from Baylor University in 1983 and his J.D. from the University of Alabama in 1987.

John DeRiggi is president of our student housing business and chief investment officer. Mr. DeRiggi was promoted to the position of president of our student housing business on July 1, 2006, from his prior position as Executive Vice President. As president of our student housing business, Mr. DeRiggi is responsible for the oversight of all aspects of the student housing division, including management and operations. As chief investment officer, Mr. DeRiggi will continue to be responsible for capital markets

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activities for GMH Communities Trust, including asset level financing. In his prior position as Executive Vice President, Mr. DeRiggi was responsible for acquisition of student housing assets, and development of new student housing properties. Previously, Mr. DeRiggi was senior vice president of GMH Capital Partners, LP, with direct oversight of the Corporate Services Group, the Investment Services Group, and portfolio/data administration. Previously, Mr. DeRiggi was a member of GMH Associates’ Investment Acquisition Group, where he was responsible for structuring the acquisition of residential and commercial properties for the Company’s investment accounts. Prior to joining GMH Associates in 1997, Mr. DeRiggi was an investment property specialist with the Tampa, Florida office of the Grubb & Ellis Company. He holds a Bachelor of Science degree in Business from the State University of New York and an MBA with distinction from Hofstra University.

J. Patrick O’Grady is our executive vice president and chief financial officer. Mr. O’Grady oversees the Company’s accounting and financial reporting activities, including its student housing and military housing divisions. Prior to joining the Company, Mr. O’Grady served as an Assurance Partner with KPMG LLP from May 2002 and previously as a partner with Arthur Andersen LLP from September 1997-May 2002. Mr. O’Grady has served many entrepreneurial companies primarily in the real estate and healthcare industries and has been involved with three REIT IPO’s and has served many REIT’s, developer’s, broker’s and property managers during his career. He has participated in transactions raising over $3 billion of debt and equity financing. Mr. O’Grady is a member of the AICPA, PICPA and NAREIT and is a licensed certified public accountant in Pennsylvania and Florida. Mr. O’Grady holds a Bachelor of Science degree in accounting from LaSalle University where he graduated magna cum laude.

Joseph M. Macchione is our executive vice president, general counsel and secretary. Mr. Macchione oversees all legal matters for GMH Communities Trust, including its student housing and military housing divisions. Before joining GMH Associates in February 2001, Mr. Macchione practiced at the law firm of Morgan, Lewis & Bockius LLP from March 1998 to February 2001, and prior to that time at the law firm of Ballard, Spahr, Andrews & Ingersoll LLP, where his legal practice focused on commercial real estate, construction, environmental and telecommunications law matters. Mr. Macchione is an Executive Committee Member of the Real Property Section of the Philadelphia Bar Association, and is licensed to practice law in Pennsylvania and New Jersey. Mr. Macchione received his J.D., cum laude, from Temple University School of Law, and his undergraduate degree, summa cum laude, from Temple University.

Audit Committee and Audit Committee Financial Expert

The Company’s Audit Committee is comprised of three independent trustees, Messrs. Eastwood, Kessler and Silfen. The Audit Committee has been established as a separately-designated standing committee of the Company’s Board of Trustees in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. Each of the members of the Audit Committee meets the financial literacy requirements of the NYSE and is independent as defined under the Company’s Corporate Governance Guidelines and consistent with the listing standards of the NYSE. The Board has affirmatively determined that Mr. Kessler, who serves as the chairperson of the Audit Committee, is an “audit committee financial expert” as defined under applicable SEC regulations. In accordance with the terms of the Audit Committee formal charter, the Audit Committee oversees, reviews and evaluates:

·our financial statements;

·our accounting and financial reporting processes;

·the integrity and audits of our financial statements;

·our disclosure controls and procedures;

·our internal control functions;

·our compliance with legal and regulatory requirements;

·the qualifications and independence of our independent auditors; and

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·the performance of our internal and independent auditors.

The Audit Committee also:

·has sole authority to appoint, compensate, oversee, retain or replace our independent auditors;

·has sole authority to approve in advance all audit and permissible non-audit services, if any, by our independent auditors and the fees to be paid in connection therewith;

·is responsible for establishing and maintaining whistleblower procedures;

·conducts an annual self-evaluation;

·prepares an Audit Committee report for publication in our annual proxy statement;

·monitors compliance of our employees with our standards of business conduct and conflict of interest policies; and

·meets at least quarterly with our senior executive officers, internal audit staff and our independent auditors in separate executive sessions.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and trustees and persons who own more than 10% of the Company’s common shares to file reports of ownership and changes in ownership of the Company’s common shares and any other equity securities with the SEC and the NYSE. Executive officers, trustees and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of Forms 3, 4 and 5 furnished to the Company during or with respect to 2006, or written representations from certain reporting persons that no such forms were required to be filed by such persons, we believe that all of the Company’s executive officers, trustees and greater than 10% shareholders complied during 2006 with all filing requirements applicable to them.

Code of Ethics

Code of Business Conduct and Ethics.   The Company has adopted a Code of Business Conduct and Ethics in accordance with the corporate governance rules of the NYSE. The code contains a policy that prohibits conflicts of interest between the Company’s officers, employees and trustees on the one hand, and the Company on the other hand, except where our Audit Committee approves of the transaction involving the potential conflict. The Company’s conflicts of interest policy states that a conflict of interest exists when a person’s private interest is not aligned or appears not to be aligned, or interferes or appears to interfere, in any way, with the Company’s interest. For example, the Company’s conflicts of interest policy prohibits its officers, employees and trustees from entering into agreements, transactions or business relationships, or otherwise taking actions, that involve conflicts of interest, other than such agreements, transactions or business relationships or other actions that are (i) otherwise contemplated in the prospectus relating to the Company’s initial public offering, or (ii) approved in advance by the Company’s Audit Committee. Except as otherwise permitted as described in the foregoing sentence, the Company is prohibited from, among other things, engaging in the following activities:

·acquiring any assets or other property from, or selling any assets or other property to, any of the Company’s trustees, officers or employees, any of their immediate family members or any entity in which any of the Company’s trustees, officers or employees or any of their immediate family members has an interest of 5% or more;

·making any loan to, or borrowing from, any of the Company’s trustees, officers or employees, any of their immediate family members or any entity in which any of the Company’s trustees, officers or employees or any of their immediate family members has an interest of 5% or more;

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·engaging in any other transaction with any of the Company’s trustees, officers or employees, any of their immediate family members or any entity in which any of the Company’s trustees, officers or employees or their immediate family members has an interest of 5% or more; or

·permitting any of the Company’s trustees or officers to make recommendations regarding or to approve compensation decisions that will personally benefit such trustees or officers or their immediate family members whom the Company employs, other than customary compensation for service on the Company’s Board of Trustees and its committees.

A copy of this code may be viewed on the Corporate Governance section of the “Investor Relations” page on the Company’s website at www.gmhcommunities.com.

Code of Ethics for Chief Executive Officer and Senior Financial Employees.   The Company has adopted a Code of Ethics for Chief Executive Officer and Senior Financial Employees that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions. A copy of this code may be viewed on the Corporate Governance section of the “Investor Relations” page on the Company’s web site at www.gmhcommunities.com. To the extent permitted by the corporate governance rules of the NYSE, the Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding the amendment to, or waiver of, a provision of the code by posting such information under the Corporate Governance section of the “Investor Relations” page on the Company’s website at www.gmhcommunities.com.

Item 11.Executive Compensation.

Compensation Discussion and Analysis

Overview of Compensation Program

The Compensation Committee (for purposes of this analysis, the “Committee”) of the Board has been appointed to discharge the Board’s responsibilities relating to the compensation of the Company’s executive officers. The Committee has the overall responsibility for approving and evaluating the Company’s executive officer compensation plans, policies and programs. The Committee’s primary objectives include serving as an independent and objective party to review these compensation plans, policies and programs.

Throughout this report, the individuals who served as the Company’s chief executive officer and chief financial officer during fiscal 2006, as well as the other individuals included in the Summary Compensation Table presented below, are sometimes referred to in this report as the “named executive officers.”

Compensation Philosophy and Objectives

The Compensation Committee believes that a well-designed compensation program should align the goals of the shareholders with the goals of the chief executive officer, and that a significant part of the executive’s compensation, over the long term, should be dependent upon the value created for shareholders. In addition, all executives should be held accountable through their compensation for the Company’s performance, and compensation levels should also reflect the executive’s individual performance during the period in an effort to encourage increased individual contributions to the Company’s performance. The compensation philosophy, as reflected in the Company’s employment agreements with its executives, is designed to motivate executives to focus on operating results and create long-term shareholder value by:

·establishing a plan that attracts, retains and motivates executives through compensation that is competitive with a peer group of other publicly-traded real estate investment trusts, or REITs;

·linking a portion of executives’ compensation to the achievement of the Trust’s business plan by using measurements of the Trust’s operating results and shareholder return; and

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·building a pay-for-performance system that encourages and rewards successful initiatives within a team environment.

The Compensation Committee believes that each of the above factors is important when determining compensation levels. Initially, the Committee reviews and approves annually the chief executive officer’s proposed corporate and individual performance goals and objectives relevant to executive officers and subsequently evaluates performance of the executive officers in light of those goals and objectives. The Committee considers the Company’s performance, relative shareholder return, the total compensation provided to comparable officers at similarly-situated companies, and compensation given to executive officers in prior years. To that end, the Committee believes executive compensation packages provided by the Company to its executive officers should include both base salaries and annual bonus awards that reward corporate and individual performance, as well as incentivize those executives to meet or exceed established goals.

Role of Executive Officers in Compensation Decisions

The Committee makes all final compensation decisions for the Company’s executive officers. The chief executive officer annually reviews the performance of the executive officers other than himself (his performance is reviewed solely by the Committee), and then presents his conclusions and recommendations to the Committee with respect to base salary adjustments and annual cash bonus award amounts. The Committee then has the ability to exercise its own discretion in modifying any recommended adjustments or awards to the executives (subject where relevant to applicable terms under employment agreement), but does consider the recommendations from the chief executive officer, as well as any self-evaluations prepared by executive officers in light of any individual performance goals that have been pre-approved by the Committee.

Role of Equity-Based Compensation in Compensation Analysis

Historically, the Committee has approved only annual base salary adjustments and cash bonus awards for executive officers, and has not established any program pursuant to which executive officers receive equity-based awards under the Company’s Equity Incentive Plan. To date, the only named executive officer to whom equity-based compensation has been awarded is Mr. O’Grady, the Company’s current chief financial officer. The grant to Mr. O’Grady was part of his initial employment package under an employment agreement that became effective on July 1, 2006. The grant to Mr. O’Grady consisted of 40,000 restricted common shares as called for by the employment agreement, which shares will vest over a three-year period (10,000 shares upon the first anniversary of employment, and 15,000 shares for each of the second and third anniversaries of employment).

No other equity-based awards have been granted to executive officers or other Company employees since inception of the Company’s Equity Incentive Plan. The Committee has, however, discussed its intention to implement a formal equity-based compensation program for executive officers and other Company employees by the end of 2007. The Committee views any such equity-based program as a form of long-term compensation, and currently expects to structure the program to include the grant of restricted common shares with vesting restrictions over one or more years of employment. The Committee also currently plans to work with an independent compensation consultant in structuring the terms of any such equity-based compensation program, and to review the terms of similar programs utilized by other peer group companies. The Committee believes that the grant of equity-based compensation that includes a vesting period over several years of employment will promote the Company’s goal of retaining key employees, and align the key employee’s interests with those of the Company’s shareholders from a long-term perspective.

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Role of Employment Agreements in Determining Executive Compensation

Each of the Company’s currently employed executive officers is a party to an employment agreement. At the time of the Company’s initial public offering in October 2004, the Company executed employment agreements with three of its then top executive officers:  the chief executive officer and the presidents of the Company’s student housing and military housing divisions. Then, in July 2006, in light of recommendations received from independent counsel engaged by the Company’s Audit Committee to conduct a special investigation relating to accounting and auditing matters, the Company executed employment agreements with the Company’s new chief financial officer, J. Patrick O’Grady, as well as with the Company’s new president of the student housing division, John DeRiggi, and the Company’s general counsel, Joseph M. Macchione. More specifically, the recommendations from the Audit Committee’s independent counsel provided that the Committee should consider entering into an employment agreement with its new chief financial officer, which agreement would include severance provisions, and would reduce, compared to the Company’s past employment agreements with other executive officers, the percentage of overall compensation linked to overall Company performance. These measures were recommended for consideration by the Committee in an effort to ensure the chief financial officer’s independence, in light of the Company’s tone-at-the-top material weakness identified as part of the Company’s evaluation of internal control over financial reporting as of December 31, 2005. Upon consideration of these recommendations, the Committee determined that it was appropriate to enter into such an employment agreement with Mr. O’Grady.

In addition, the Committee concluded that the same considerations of promoting Mr. O’Grady’s independence were applicable to the Company’s other executive officers, and therefore the Committee simultaneously approved of the execution of employment agreements with the Company’s other executive officers who had no such agreement at that time. Based on the foregoing objectives, the Committee has structured the compensation terms under these other employment agreements to motivate executives to achieve the business objectives set by the Company and reward the executives for achieving such objectives, as well as to promote the Company’s goal of retaining key employees.

Annual Base Salaries

Base salaries are paid for ongoing performance throughout the year. In order to compete for and retain talented executives who are critical to the Company’s long-term success, the Committee has determined that the base salaries of executive officers should be generally in line with the average of those of executives of other equity REITs that compete with the Company for employees, investors and business, while also taking into account the executive officer’s individual performance and tenure and the Company’s performance relative to its peer companies within the REIT sector.

Each of the Company’s employment agreements is subject to an initial three-year term and provides for the following initial annual base salaries: Gary M. Holloway, Sr., $350,000; Bruce F. Robinson, $325,000; John DeRiggi, $300,000; J. Patrick O’Grady, $300,000; and Joseph M. Macchione, $250,000. The initial base salaries included in the Company’s employment agreements for Messrs. Holloway and Robinson were reviewed and recommended by The Schonbraun McCann Group LLC, an independent consulting firm engaged prior to completion of the Company’s initial public offering in November 2004. The initial base salaries included in the Company’s employment agreements for Messrs. O’Grady, DeRiggi and Macchione were evaluated by the Committee on the basis of a peer group report compiled by the Committee’s compensation consultant, which provided an analysis of salary and bonus amounts paid to similarly-situated employees at several comparably-sized companies. Prior to the date of effectiveness of the employment agreements for Messrs. DeRiggi and Macchione on July 1, 2006, their annual base salaries for 2006 ($275,000 and $250,000, respectively) had been similarly evaluated by the Committee in conjunction with its review of the independent compensation consultant’s peer group report. The Committee’s compensation consultant included the following companies as part of the Company’s peer

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group for purposes of comparing compensation of executives: American Campus Communities, American Financial Realty Trust, Brandywine Realty Trust, Education Realty Trust, Pennsylvania Real Estate Investment Trust, and Liberty Property Trust. In evaluating the compensation provided within this peer group, the Committee considers differences between the relevant peer group company and the Company, such as location, market presence, size, type of real estate holdings, market capitalization, and other pertinent factors. The Committee, together with itscompensation consultant, will periodically review and update the Company’s list of peer group companies to ensure that it is comprised of those companies that compete for similar talent and investors.

Under the terms of the executive officers’ employment agreements, the base salaries are to be increased annually effective January 1 of each year during the term of the employment agreement, and such increases will be a minimum positive amount equal at least to the percentage increase in the Consumer Price Index. During the first quarter of 2006, the Committee determined that it would seek to enter into employment agreements with Messrs. DeRiggi and Macchione (as well as with Mr. O’Grady, who had been offered the position of chief financial officer but not yet accepted employment), but that in the meantime it was appropriate to set the annual adjustments of the 2006 base salaries for Messrs. DeRiggi and Macchione. The Committee also agreed that it was appropriate to adjust the 2006 base salaries to amounts similar to the base salaries that were to be offered under the employment agreements with these executive officers. As referenced above, the Committee used a peer group compensation report provided by its compensation consultant in evaluating the initial base salaries to be offered to these executives under their employment agreements, and sought to ensure that the base salaries would be near the average of the base salaries received by similarly-situated employees at the peer group companies. Accordingly, during the first quarter of 2006, the Committee approved of a 2006 annual base salary for Mr. Macchione of $250,000, and for Mr. DeRiggi of $275,000, each of which was made retroactive to January 1, 2006. At the time that the Committee approved of this 2006 annual base salary for Mr. DeRiggi (which was the initial base salary to be offered under his employment agreement), Mr. DeRiggi had not yet been appointed to the position of president of the student housing business. Once Mr. DeRiggi was appointed to the position of president of the student housing business, in addition to his current role as chief investment officer, the Committee determined that it was appropriate to increase the initial base salary under his employment agreement to $300,000. The base salary under Mr. DeRiggi’s employment agreement did not become effective until July 1, 2006.

Upon the termination of Bradley W. Harris, the Company’s former chief financial officer, on March 31, 2006, the Board appointed Dennis J. O’Leary, a non-employee trustee of the Board, as the interim chief financial officer of the Company, to serve until a formal replacement for the position could be located. In approving the salary to be provided to Mr. O’Leary during his employment by the Company, the Committee considered that Mr. O’Leary was accepting the position under a set of extremely volatile circumstances, including (i) the pending outcome of the special investigation being conducted by the Audit Committee, (ii) anticipated restatements to the Company’s previously filed financial results, (iii) threats of class action shareholder litigation, and (iv) the need to work with the Company’s independent auditors and the Company’s forensic accountants to complete additional procedures necessary to complete the Company’s audit for the fiscal year 2005. Mr. O’Leary served as the Company’s interim chief financial officer from April 1, 2006 through June 30, 2006, and then as executive vice president and principal accounting officer from July 1, 2006 through August 15, 2006.

Annual Incentive Bonus Awards

In addition to the provisions for base salaries under the terms of our employment agreements, each executive is entitled to receive an annual cash bonus for each calendar year during the term of the agreement, based on the achievement of  individual and corporate performance goals set by the Committee. The Committee establishes achievement thresholds for the bonuses to be paid with respect to the achievement of these goals, as follows: (a) for Mr. Holloway, threshold, target, superior and

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outperformance levels equal to 40%, 80%, 120%, and 200%, respectively, of his base salary; (b) for Mr. Robinson, threshold, target, superior and outperformance levels equal to 40%, 80%, 120%, and 175%, respectively, of his base salary; and (c) for Messrs. DeRiggi, O’Grady and Macchione, threshold, target and superior levels equal to 40%, 80% and 120%, respectively, of their respective base salaries. Under the terms of Mr. O’Grady’s employment agreement, which became effective on July 1, 2006, he was guaranteed a cash bonus for the calendar year 2006 equal to no less than $120,000, of which $100,000 was required to be paid and was paid, within five business days after the effective date of his employment agreement.

Under the terms of the employment agreements, the Board or the Committee is required to meet during the first 90 days of each calendar year (120 days solely with respect to the 2006 calendar year for Messrs. DeRiggi, O’Grady and Macchione) to determine the relevant individual and corporate performance goals for each executive officer for the then-current year. At the end of that year, an assessment of individual and corporate performance against these goals is used to determine the cash incentive bonuses to be awarded in accordance with the following formula set forth under the employment agreements:

total annual incentive bonus = individual performance bonus + corporate performance bonus

where:

individual performance bonus = individual performance level achieved (threshold, target, superior or outperformance percentage, as applicable) x individual goals allocation x base salary

corporate performance bonus = corporate performance level achieved (threshold, target, superior or outperformance percentage, as applicable) x corporate goals allocation percentage x base salary

With respect to the allocation of individual and corporate goals, the applicable percentages under the employment agreements are 20% and 80%, respectively, for Messrs. Holloway, Robinson and DeRiggi, and 40% and 60%, respectively, for Messrs. O’Grady and Macchione. In setting individual performance goals, the Committee obtains a list of such goals from each of the executive officers, which generally include personal objectives of the individual for the coming year that relate to their management, and the general performance, of their respective department (or the Company as a whole, as it relates to the chief executive officer). With respect to corporate goals, management as a whole submits its recommendations to the Committee as to various Company performance objectives for the coming year, which generally are divided into goals for each of the student housing and military housing segments, as well as the Company’s overall performance on the basis of funds from operations, or FFO. These corporate performance goals are further broken down into threshold, target, superior or (where applicable) outperformance levels. Historically, the corporate performance goals relating to student housing have been based on the dollar value of student housing acquisitions completed during a fiscal year, and goals covering military housing have been based on the number of military housing end-state housing units awarded under military housing privatization projects during a fiscal year. With respect to FFO, the Committee historically has reviewed analyst consensus for projected fiscal year FFO of the Company in setting the target level of performance. In addition to these purely quantitative factors, the Committee also performs a qualitative analysis with respect to the Company’s and each business segment’s performance for the fiscal year. The Committee reviews the recommendations submitted by management for both individual and corporate performance goals, and uses its discretion in making appropriate adjustments to the recommendations before finally approving them.

In light of the events surrounding the special investigation performed by the Audit Committee of the Board, which commenced in the first quarter of 2006 and did not end until the third quarter of 2006, the Committee did not set individual and corporate performance goals for the executive officers during the

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respective timeframes called for by the employment agreements in 2006. Accordingly, the 2006 cash bonus awards for executive officers, as approved by the Committee in March 2007, were not determined pursuant to the compensatory plan as specifically called for under the employment agreements. Rather, for purposes of determining cash bonus awards for 2006, the Committee calculated the awards by categorizing the 2006 individual performance of each executive officer into a threshold, target, superior or outperformance level (to the extent applicable under the executive’s employment agreement), and then multiplying the percentage associated with such level under the executive’s employment agreement by his then-current base salary. For example, if the Committee determined that an executive officer’s individual performance during 2006 was at a superior level, then his base salary was multiplied by 120% in order to determine the total cash bonus award to be paid.

In terms of evaluating the appropriate performance levels to assign to each of the executive officers for 2006, the Committee considered recommendations from the chief executive officer, as well as its own assessment of the work that had been performed by the executives throughout the year. With respect to Mr. Holloway, the Committee concurred with his position that he not be considered for any bonus award for 2006 and, accordingly, did not award any bonus award to Mr. Holloway for 2006. With respect to Mr. O’Grady, who commenced employment as the Company’s chief financial officer on July 1, 2006, his employment agreement provided that he was entitled to receive a minimum 2006 bonus award of $120,000, of which $100,000 was paid within five business days of his commencement of employment, as discussed above. The Committee awarded Mr. O’Grady an additional $20,000 above this minimum bonus amount called for under the employment agreement, in recognition of Mr. O’Grady’s contributions during the second half of 2006, including his management of the engagement of a replacement independent auditing firm for the Company and the timely filing of the Company’s Quarterly Report on Form 10-Q for the third fiscal quarter of 2006, which was the first timely filed filing achieved by the Company during 2006 and was made especially challenging by the replacement of the independent auditors during the third quarter. The Committee also noted that Mr. O’Grady had been awarded 40,000 restricted common shares as part of his initial employment package under the terms of his employment agreement.

In evaluating 2006 individual performance for Messrs. DeRiggi and Macchione, the Committee considered the additional responsibilities that each had managed throughout the year. With respect to Mr. DeRiggi, the Committee noted his dual role as both chief investment officer and president of the student housing division (to which position he was appointed  at mid-year). As to Mr. Macchione, the Committee noted his coordination of, and assistance with, a number of unexpected legal and operational matters, including the Audit Committee’s special investigation, pending class action litigation and activities relating to the Special Committee of the Board. As to Mr. Robinson’s 2006 performance, the Committee acknowledged that the Company’s military housing division had performed in line with management’s 2006 budget and successfully closed on the award of several military housing privatization projects slated for 2006. In recognition of the efforts exerted by Messrs. Robinson, DeRiggi and Macchione on these fronts, the Committee determined that each executive had performed at a superior level of individual performance, equating to a 120% multiplier in accordance with the methodology for determining 2006 bonus levels discussed above.

In addition to its determination of the executive’s individual performance levels for 2006, the Committee also compared the executive’s total compensation for 2006 to that of similarly-situated personnel under the Company’s peer group analysis provided by the Committee’s independent compensation consultant. The Committee noted that the 2006 total compensation to be awarded to these executives was within the average range of combined total compensation for similarly-situated positions under the applicable peer group analysis. The Committee also solicited feedback from non-management members of the Board prior to making its final determination of 2006 cash bonus awards, and considered, most notably with respect to Mr. DeRiggi, the importance of promoting the retention of employees holding key positions within the Company.

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Equity-Based Compensation

The employment agreements also provide that the executives are eligible for grants of stock options and restricted common shares under the Company’s Equity Incentive Plan, pursuant to the terms and conditions as determined by the Committee. With respect to restricted share grants, the employment agreements provide that the shares will have voting and dividend rights, and following the applicable restriction period as determined by the Committee, will be fully transferable to the executive. As stated above, the Committee has not granted any equity-based compensation to the Company’s executive officers to date, other than the restricted common shares awarded to Mr. O’Grady as part of his initial employment package. The Committee does, however, expect to implement a formal equity-based compensation program for executive officers and other Company employees by the end of 2007.

Perquisites and Other Personal Benefits

The Company’s employment agreements provide the executive officers with perquisites and other personal benefits that the Company and the Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to the executive officers.

The executive officers are provided the following benefits under the terms of their employment agreements: an allotted number of paid vacation weeks; eligibility for the executive and his spouse and dependents in all Company sponsored employee benefits plans, including 401(k) plan, group health, accident, disability insurance, group life insurance and supplemental life insurance, on such terms no less favorable than applicable to any other executive; eligibility for participation in any Company sponsored deferred compensation plans (of which there are currently none that are utilized); an annual physical medical examination at the Company’s cost; a monthly car allowance; reimbursement for costs associated with tax and financial planning assistance; coverage under a Company-paid director and officer insurance plan on terms no less favorable than coverage provided to any other then current officer or trustee; and, supplemental renewable long-term disability insurance, at the Company’s cost, as agreed to by the Company and the executive. Attributed costs of the personal benefits described above for the named executive officers for the fiscal year ended December 31, 2006, are included in column (i) of the “Summary Compensation Table provided below under Item 11 of this report.

In addition, the executives’ employment agreements each contain provisions relating to payments upon change in control events and severance upon termination for events other than without cause or good reason (as defined under the terms of the employment agreements). These change in control and severance terms are designed to promote stability and continuity of senior management. Information regarding applicable potential payments under these provisions for the named executive officers is provided under the heading “Potential Payments Upon Termination or Change in Control” presented below in Item 11 of this report.

Federal Tax Regulations

Section 162(m) of the Code limits the deductibility on the Company’s income tax return to compensation of $1.0 million for certain executive officers unless, in general, the compensation is paid pursuant to a plan that is performance-based, nondiscretionary and has been approved by the Company’s shareholders. The Compensation Committee’s policy with respect to Section 162(m) since the Company’s initial public offering is to make reasonable efforts to ensure that compensation is deductible to the extent permitted, while simultaneously providing the Company’s executives with appropriate rewards for their performance.

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COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this report.

THE COMPENSATION COMMITTEE

RADM James W. Eastwood (Ret), Chairman

Frederick F. Buchholz

Denis J. Nayden

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Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the named executive officers for the year ended December 31, 2006. The Company has entered into employment agreements with each of its currently-employed named executive officers.

Name and Principal Position (a)	Year (b)	Salary ($) (c)		Bonus ($) (d)		Share Awards ($) (e)(1)		Option Awards ($) (f)			All Other Compensation ($) (i)(2)			Total ($) (j)
Gary M. Holloway, Sr.	2006	$	360,000	$	0	$	0		$	0		$	37,556	$	397,556
Chairman, President & Chief
Executive Officer
J. Patrick O’Grady	2006	$	150,000	$	140,000	$	88,733		$	0		$	9,812	$	388,545
Executive Vice President &
Chief Financial Officer
(July 1, 2006 through
December 31, 2006)
Dennis J. O’Leary	2006	$	288,000	$	0	$	1,376		$	0		$	0	$	289,376
Interim Chief Financial
Officer (April 1, 2006 through
June 30, 2006)
EVP & Principal Accounting
Officer (July 1, 2006 through
August 15, 2006)
Bradley W. Harris	2006	$	60,000	$	0	$	0		$	0		$	349,615	$	409,615
Former Chief Financial
Officer (January 1, 2006 through
March 31, 2006)
Bruce F. Robinson	2006	$	335,000	$	402,000	$	0		$	0		$	32,978	$	769,978
President of Military Housing
Business
John DeRiggi	2006	$	287,500	$	345,000	$	0		$	0		$	30,113	$	662,613
President of Student Housing
Business & Chief Investment
Officer
Joseph M. Macchione	2006	$	250,000	$	300,000	$	0		$	0		$	17,786	$	567,786
Executive Vice President,
General Counsel & Secretary

(1)The amounts in column (e) reflect the dollar amount recognized by the Company as an expense for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with FAS 123R, with respect to awards pursuant to the Company’s Equity Incentive Plan. Mr. O’Grady received 40,000 restricted shares on July 1, 2006, in accordance with the terms of his employment agreement that became effective as of that date. The restricted shares vest over a three-year period, with 10,000 vesting on July 1, 2007 and 15,000 shares vesting on each of July 1, 2008 and July 1, 2009. Mr. O’Leary, who served as the Company’s interim chief financial officer during a portion of 2006, receives grants of restricted shares for his service as a non-employee trustee on the Company’s Board of Trustees. Additional information relating to the annual grant of restricted shares to the Company’s non-employee trustees is provided in the table below titled “Trustee Compensation.”  The number of restricted shares granted to Mr. O’Leary for the fiscal year 2006 was pro-rated to exclude the period of time that he served as an employee of the Company. Both vested and unvested restricted shares receive dividend distributions made by the Company.

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(2)Mr. Holloway’s employment agreement provides that he will receive a monthly car allowance of $1,500, and other benefits as are commensurate with his position, including reimbursement for the cost of tax preparation and financial planning services up to a maximum aggregate of $10,000 annually, an annual medical examination and six weeks of paid vacation annually and various other customary benefits. Pursuant to Messrs. Robinson’s and DeRiggi’s employment agreements, each will receive a monthly car allowance of $1,000 and other benefits as are commensurate with his position, including reimbursement for the cost of tax preparation and financial planning services up to a maximum aggregate of $10,000 annually, an annual medical examination, five weeks of paid vacation annually and various other customary benefits. Pursuant to Messrs. O’Grady’s and Macchione’s employment agreements, each will receive a monthly car allowance of $650 and other benefits as are commensurate with his position, including reimbursement for the cost of tax preparation and financial planning services up to a maximum aggregate of $5,000 annually, an annual medical examination, five weeks of paid vacation annually and various other customary benefits. The employment agreements for Messrs. DeRiggi, O’Grady and Macchione became effective as of July 1, 2006.

During 2006, the Company paid car allowances for Messrs. Holloway, Robinson, DeRiggi, O’Grady and Macchione of $18,000, $12,000, $9,900, $3,900 and $7,800 respectively; and paid tax planning services for each of Messrs. Holloway, Robinson, DeRiggi, O’Grady and Macchione of $10,000, $10,000, $9,900, $2,500 and $7,800, respectively. During 2006, the Trust made the following matches under the Company’s 401(k) plan: $1,328 (Mr. Holloway); $2,750 (Mr. Robinson); $2,485 (Mr. DeRiggi); $669 (Mr. O’Grady); and $104 (Mr. Macchione); and paid medical benefits as follows: $8,228  (Mr. Holloway); $8,228 (Mr. Robinson); $8,228 (Mr. DeRiggi); $2,743 (Mr. O’Grady);  and $2,082 (Mr. Macchione). The amount shown for Mr. O’Leary includes $21,946 of cash fees paid in connection with service as a non-employee trustee of the Company’s Board of Trustees.

(3)Mr. Harris served as the Company’s chief financial officer until his termination of employment effective March 31, 2006. On June 28, 2006, the Company entered into a Confidential Settlement Agreement and General Release with Mr. Harris, pursuant to which Mr. Harris received the right to the following payments: (i) payment of $75,000, less applicable deductions and withholdings, representing an amount equal to four months of pay at employee’s base salary as of the termination date, (ii) a payment of $18,750, representing an amount equal to Mr. Harris’ bonus attributable to the year ended December 31, 2005, (iii) a payment of $1,250, representing payment toward outplacement service fees incurred by Mr. Harris, (iv) commencing on August 15, 2006, a sum of $250,000, less applicable deductions and withholdings, to be paid in semi-monthly installments of $9,375 in accordance with the company’s normal payroll cycle, and (v) a payment of $4,615 representing payment of his earned but unused vacation as of his termination date. In addition, the Company has made a payment to Mr. Harris’ legal counsel in the gross amount of $25,000.

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Grants of Plan-Based Awards

Name (a)	Grant Date (b)	All Other Share Awards: Number of Shares or Units (#) (i)		All Other Option Awards: Number of Securities Underlying Options (#) (j)		Grant Date Fair Value of Share and Option Awards (l)
Gary M. Holloway, Sr.	—		—		—		—
Chairman, President & Chief Executive Officer
J. Patrick O’Grady	July 1, 2006		40,000		—		$	532,400
Executive Vice President & Chief Financial Officer (July 1, 2006 through December 31, 2006)
Dennis J. O’Leary	September 5, 2006		948		—		$	12,381
Interim Chief Financial Officer (April 1, 2006 through June 30, 2006)
EVP & Principal Accounting Officer (July 1, 2006 through August 15, 2006)
Bradley W. Harris	—		—		—		—
Former CFO (January 1, 2006 through March 31, 2006)
Bruce F. Robinson	—		—		—		—
President of Military Housing Business
John DeRiggi	—		—		—		—
President of Student Housing Business & Chief Investment Officer
Joseph M. Macchione	—		—		—		—
Executive Vice President, General Counsel & Secretary

The amounts in column (l) of the foregoing table reflect the grant date fair value calculated in accordance with FAS 123(R). During 2006, J. Patrick O’Grady was the only individual to receive a plan-based award for service as an employee. The grant was made as of July 1, 2006 under the Company’s Equity Incentive Plan, and approved as part of Mr. O’Grady’s compensation pursuant to his employment agreement, which also became effective as of July 1, 2006. Pursuant to the terms of his employment agreement, Mr. O’Grady received a grant of 40,000 restricted common shares, of which 10,000 shares will vest on July 1, 2007 and 15,000 shares will vest on each of July 1, 2008 and July 1, 2009. On July 1, 2006, the fair market value of the Company’s common shares, based on the closing price as reported by the New York Stock Exchange, was $13.18 per share. Under the terms of the grant, Mr. O’Grady will receive dividends on all 40,000 restricted shares while he remains employed with the Company. The Company has historically paid a dividend with respect to each of its fiscal quarters, at a rate that is determined at the discretion of its Board of Trustees. The restricted shares will continue to vest while Mr. O’Grady remains employed with the Company, but will vest 100% immediately upon (i) a change of control of the Company, (ii) upon the employee’s termination of employment by the Company without cause (as defined in the Equity Incentive Plan), and (iii) upon the employee’s death or becoming permanently disabled (as defined in the Equity Incentive Plan). To the extent that Mr. O’Grady is terminated from employment by the Company with cause, the unvested portion of the restricted shares will be forfeited immediately to the Company.

Mr. O’Leary received a grant of 948 restricted shares on September 5, 2006 in connection with his service as a non-employee trustee of the Company’s Board of Trustees. Additional information relating to the annual grant of restricted shares to the Company’s non-employee trustees is provided in the table below titled “Trustee Compensation.” The number of restricted shares granted to Mr. O’Leary for the fiscal year 2006 was pro-rated to exclude the period of time that he served as an employee of the Company. Under the terms of the restricted share grant, Mr. O’Leary will receive dividends on all 948 restricted shares, and the shares will vest in equal annual installments over a three-year period (with the first installment vesting on June 30, 2007).

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Outstanding Equity Awards at Fiscal Year-End

	Option Awards										Share Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity  Incentive  Plan  Awards: Number  of Securities Underlying Unexercised Unearned Options (#)		Option  Exercise Price ($)		Option  Expiration Date		Number of Shares  or Units  of  Shares  That Have  Not Vested (#)		Market Value  of Shares  or Units  of Shares  That Have  Not Vested ($)		Equity  Incentive  Plan  Awards: Number of  Unearned  Shares,  Units or Other  Rights That Have Not  Vested (#)			Equity Incentive Plan Awards: Market or Payout Value  of Unearned Shares, Units  or Other Rights  That Have Not Vested ($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)			(j)
Gary M. Holloway, Sr.		—		—		—		—		—		—		—		—			—
Chairman, President & Chief Executive Officer
J. Patrick O’Grady		—		—		—		—		—		—		—		40,000	(1)		$	406,000	(1)
Executive Vice President & CFO (July 1, 2006 through December 31, 2006)
Dennis J. O’Leary		—		—		—		—		—		—		—		3,095	(2)		$	31,414	(2)
Interim Chief Financial Officer (April 1, 2006 through June 30, 2006) EVP & Principal Accounting Officer (July 1, 2006 through August 15, 2006)
Bradley W. Harris		—		—		—		—		—		—		—		—			—
Former CFO (January 1, 2006 through March 31, 2006)
Bruce F. Robinson		—		—		—		—		—		—		—		—			—
President of Military Housing Business
John DeRiggi		—		—		—		—		—		—		—		—			—
President of Student Housing Business & Chief Investment Officer
Joseph M. Macchione		—		—		—		—		—		—		—		—			—
Executive Vice President, General Counsel & Secretary

(1)Represents 40,000 restricted shares granted to Mr. O’Grady under the Company’s Equity Incentive Plan on July 1, 2006, pursuant to the terms of Mr. O’Grady’s employment agreement. The shares vest over a three-year period, with 15,000 vesting on July 1, 2007 and 10,000 vesting on each of July 1, 2008 and July 1, 2009. Under the terms of the grant, Mr. O’Grady will receive dividends on all 40,000 restricted shares while he remains employed with the Company. The Company has historically paid a dividend with respect to each of its fiscal quarters, at a rate that is determined at the discretion of its Board of Trustees. The restricted shares will continue to vest while Mr. O’Grady remains employed with the Company, but will vest 100% immediately upon (i) a change of control of the Company, (ii) upon the employee’s termination of employment by the Company without cause (as defined in the Equity Incentive Plan), and (iii) upon the employee’s death or becoming permanently disabled (as defined in the Equity Incentive Plan). To the extent that Mr. O’Grady is terminated from employment by the Company with cause, the unvested portion of the restricted shares will be forfeited immediately to the Company. The market value of the unvested shares is based on the closing price of the Company’s common shares on December 29, 2006 as reported on the New York Stock Exchange, which was $10.15 per common share.

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(2)Represents the unvested portion of restricted shares granted to Mr. O’Leary in connection with his service as a non-employee trustee of the Company’s Board of Trustees. Additional information relating to the annual grant of restricted shares to the Company’s non-employee trustees is provided in the table below titled “Trustee Compensation.”  The amount of restricted shares granted to Mr. O’Leary for the fiscal year 2006 was pro-rated to exclude the period of time that he served as an employee of the Company. Under the terms of the restricted share grants, Mr. O’Leary will receive dividends on unvested and vested shares, and the shares will vest in equal annual installments over a three-year period. The unvested restricted shares as of December 31, 2006 will vest as follows: with respect to a grant made on January 1, 2005, 1,167 shares will vest on October 28, 2007; with respect to a grant made on March 31, 2005, 142 shares will vest on March 31, 2007 and 143 shares will vest on March 31, 2008; with respect to a grant made on  June 30, 2005, 120 shares will vest on June 30, 2007 and 121 shares will vest on June 30, 2008; with respect to a grant made on  September 30, 2005, 227 shares will vest on September 30, 2007 and 228 shares will vest on September 30, 2008; and with respect to a grant made on September 5, 2006, 316 shares will vest on each of June 30, 2007, June 30, 2008 and  June 30, 2009. The market value of the unvested shares is based on the closing price of the Company’s common shares on December 29, 2006 as reported on the New York Stock Exchange, which was $10.15 per common share.

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Option Exercises and Shares Vested

	Option Awards				Share Awards
Name (a)	Number of Shares Acquired on Exercise (#) (b)		Value Realized on Exercise ($) (c)		Number of Shares Acquired on Vesting (#) (d)			Value Realized on Vesting ($) (e)
Gary M. Holloway, Sr.		—		—		—			—
Chairman, President & Chief Executive Officer
J. Patrick O’Grady		—		—		—			—
Executive Vice President & Chief Financial Officer (July 1, 2006 through December 31, 2006)
Dennis J. O’Leary		—		—		2,823	(1)		$	39,710	(1)
Interim Chief Financial Officer (April 1, 2006 through June 30, 2006) EVP & Principal Accounting Officer (July 1, 2006 through August 15, 2006)
Bradley W. Harris		—		—		—			—
Former Chief Financial Officer (January 1, 2006 through March 31, 2006)
Bruce F. Robinson		—		—		—			—
President of Military Housing Business
John DeRiggi		—		—		—			—
President of Student Housing Business & Chief Investment Officer
Joseph M. Macchione		—		—		—			—
Executive Vice President, General Counsel & Secretary

(1)Represents restricted shares pursuant to multiple grants in connection with Mr. O’Leary’s service as a non-employee trustee of the Company’s Board of Trustees. Additional information relating to the annual grant of restricted shares to the Company’s non-employee trustees is provided in the table below titled “Trustee Compensation.”   Under the terms of the restricted share grants, Mr. O’Leary will receive dividends on unvested and vested shares, and the shares will vest in equal annual installments over a three-year period. The value of the vested shares realized is calculated based on the closing price of the Company’s shares as reported on the New York Stock Exchange on the applicable vesting date for the shares, and specifically were as follows: with respect to a grant made on January 1, 2005, 1,167 shares vested on October 28, 2005 with a value of $14.92 per share and 1,167 shares vested on October 28, 2006 with a value of $13.88 per share; with respect to a grant made on March 31, 2005, 142 shares vested on March 31, 2006 with a value of $11.64 per share; with respect to a grant made on  June 30, 2005, 120 shares vested on June 30, 2006 with a value of $13.18 per share; and with respect to a grant made on  September 30, 2005, 227 shares vested on September 30, 2006 with a value of $12.62 per share.

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Potential Payments Upon Termination or Change in Control

Pursuant to the Company’s employment agreements, Messrs. Holloway, Robinson, DeRiggi, O’Grady and Macchione, each of the executives is entitled to certain termination or change-in-control payments. The employment agreements provide that the executive officers agree to devote substantially all of their business time to the performance of their duties to us under their employment agreements (except as we otherwise agree). At the end of the initial three-year term, the employment agreements will automatically extend for two additional one-year periods (each, an “Extension Term”), unless either party terminates the agreement by providing prior written notice to the other party not later than 60 days prior to expiration thereof. These employment agreements permit us to terminate the executives’ employment with appropriate notice for or without “cause.” “Cause” is generally defined to mean:

·conviction of, or the entry of a plea of guilty or nolo contendere to, a felony, excluding any felony relating to the negligent operation of a motor vehicle or a conviction, plea of guilty or nolo contendere arising under a statutory provision imposing per se criminal liability due to the position held by the executive with us, provided the act or omission of the executive or officer with respect to such matter was not taken or omitted to be taken in contravention of any applicable policy or directive of the Board of Trustees;

·a willful breach of the executive’s duty of loyalty which is materially detrimental to us; and

·a willful failure to adhere to explicitly stated duties that are consistent with the executive’s employment agreement, or the reasonable and customary guidelines of employment or reasonable and customary corporate governance guidelines or policies, including without limitation the business code of ethics adopted by our Board of Trustees, or the failure to follow the lawful directives of our Board of Trustees provided such directives are consistent with the terms of the executive’s employment agreement, which continues for a period of 30 days after written notice to the executive.

In addition, each executive has the right under his employment agreement to resign for “good reason” upon certain events that occur without such executive’s written consent, provided the executive notifies us of his determination that “good reason” exists within 60 days of when the executive knows of the occurrence of the event upon which his determination is based. For these purposes, “good reason” means (i) any material reduction in duties, responsibilities or reporting requirements, or the assignment of any duties, responsibilities or reporting requirements that are inconsistent with his positions with us; (ii) a reduction in his annual base salary; (iii) the termination or material reduction of certain employee benefit plans, programs or material fringe benefits other than in connection with modifications to plans that are applicable to all similarly situated officers; (iv) relocation of our offices outside of a 35-mile radius of Newtown Square, Pennsylvania; (v) a failure by us to renew his employment agreement on at least comparable terms at the close of the initial term or of either extension term; or (vi) our material breach of his employment agreement which continues for a period of 30 days after written notice. In addition, with respect to Mr. Holloway, such “good reason” also includes his removal from the board, other than for “cause,” or failure to be nominated or elected to the board, other than for “cause,” absent his prior written consent.

In the event of a termination of the executive’s employment by the executive or by us (or our successor) for any reason other than “cause” following a change of control, the executive will become fully vested in his options and restricted shares and shall have a two-year period from his or her date of termination to exercise his or her vested options. In general terms, a change of control occurs:

·if a person, entity or affiliated group (with certain exceptions) acquires more than 50% of our then outstanding voting securities;

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·if we merge into another entity, unless the holders of our voting shares immediately prior to the merger have at least 50% of the combined voting power of the securities in the merged entity or its parent;

·upon the liquidation, dissolution, sale or disposition of all or substantially all of our assets such that after that transaction the holders of our voting shares immediately prior to the transaction own less than 50% of the voting securities of the acquiror or its parent;

·if our board members are elected such that a majority of the board members have been members of the board for less than two years, unless the election or nomination for the election of each new board member who was not a board member at the beginning of such two year period was approved by at least two-thirds of the board members then still in office who were board members at the beginning of such period; or

·if a majority of our board votes in favor of a resolution stating that a change of control has occurred.

With respect to Messrs. Holloway and Robinson, if payments become due as a result of a change of control and the excise tax imposed by Section 4999 of the Code applies, the terms of their employment agreements require us to gross up the executives for the amount of this excise tax plus the amount of income and other taxes due as a result of the gross up payment.

Each executive has agreed with the Company that for a period after termination of his employment (18 months for Messrs. Holloway and Robinson, 24 months for Messrs. DeRiggi, O’Grady and Macchione), such executive will not compete with the Company by working with or investing in, subject to certain limited exceptions noted below, any enterprise engaged in a business substantially similar to any primary segment of our business as conducted during the period of the executive’s employment with the Company. The executive will not be subject to these restrictions if the Company commits a material breach of the executive’s employment agreement. In addition, these restrictions will not preclude the executive from (i) making any investment in a public company or any entity in which he is the owner of 5% or less of the issued and outstanding voting securities, provided ownership does not result in his being obligated or required to devote a substantial amount of managerial efforts, (ii) engaging in charitable, academic or community activities, or in trade or professional organizations, or (iii) holding directorships in other companies consistent with our conflict of interest policies and corporate governance guidelines.

The employment agreements provide that, if the executive’s employment ends due to termination by us without cause, or termination by the executive for good reason, we will be obligated to pay the following severance benefit: (i) a lump sum payment equal to (A) with respect to Mr. Holloway, three times base salary his average annual bonus determined at the superior level of both corporate and individual performance for the year in which the termination occurs, (B) with respect to Mr. Robinson, two times such amount if not in connection with a change of control and three times such amount if in connection with a change of control, and (C) with respect to Messrs. DeRiggi, O’Grady and Macchione, two times such amount, (ii) a prorated amount of the incentive bonus at the superior level for individual and corporate performance for the year in which the termination occurs, and (iii) an amount equal to accrued but unpaid base salary through the date of termination plus any other compensation then due and owing. The Company will also permit the executive to continue to participate in, and will pay the premiums for, group health coverage for a period of three years following the executive’s date of termination with respect to Messrs. Holloway and Robinson, and two years with respect to Messrs. DeRiggi, O’Grady and Macchione. Additionally, all of the options and restricted shares granted to the executive will become fully vested, and the executive will have a period of at least two years from the effective date of termination in which to exercise all vested options. If, however, any executive resigns for “good reason” upon notice of non-renewal by the Company after the second Extension Term, the multiplier described in clause (i) above will be reduced to one times such amount. Assuming a triggering event for these severance benefits upon

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termination took place as of December 31, 2006, the following payments would have been due and payable to the executive officers:

	Named Executive Officer With Employment Agreements	Estimated Aggregate Payment Upon  Termination For Cause, or by Employee  with Good Reason, as of December 31, 2006
Gary M. Holloway, Sr.			$	2,376,000
Chairman, President & CEO
J. Patrick O’Grady			$	1,320,000
Executive Vice President & CFO (July 1, 2006 through December 31, 2006)
Bruce F. Robinson			$	1,474,000
President of Military Housing Business
John DeRiggi			$	1,265,000
President of Student Housing Business & Chief Investment Officer
Joseph M. Macchione			$	1,100,000
Executive Vice President, General Counsel & Secretary

If an executive’s employment ends due to death or permanent disability, the Company will pay to the executive, or his estate or beneficiary, an amount equal to one times the executive’s base salary and the executive’s annual incentive bonus (determined at the superior level for both corporate and individual performance for the year in which the termination of employment occurs) within 10 days of the occurrence of the relevant event. Further, the executive will become vested in all options and restricted shares and the executive or the executive’s personal representative will have one year from the date of the event to exercise all vested options. The Company will pay to the executive or the executive’s representative any base salary, annual bonus, expense reimbursement, and all other compensation related payments payable as of the date of the relevant event. In addition, the Company will pay to the executive or the executive’s representative a prorated amount of the incentive bonus at the target level for corporate and individual performance for the year in which the relevant event occurred. Assuming a triggering event for these severance benefits upon termination took place as of December 31, 2006, the following payments would have been due and payable to the executive officers:

Named Executive Officer With Employment Agreements	Estimated Aggregate Payment Upon Termination as a result of Death or Permanent Disability, as of December 31, 2006
Gary M. Holloway, Sr.		$	792,000
Chairman, President & CEO
J. Patrick O’Grady		$	660,000
Executive Vice President & CFO (July 1, 2006 through December 31, 2006)
Bruce F. Robinson		$	737,000
President of Military Housing Business
John DeRiggi		$	632,500
President of Student Housing Business & Chief Investment Officer
Joseph M. Macchione		$	550,000
Executive Vice President, General Counsel & Secretary

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In the event of a termination of the executive’s employment by the executive or by us (or our successor) for any reason other than “cause” following a change of control as described above, the executive will become fully vested in his options and restricted shares and shall have a two-year period from his or her date of termination to exercise his or her vested options.

With respect to Messrs. Holloway and Robinson, if payments become due as a result of a change of control and the excise tax imposed by Section 4999 of the Code applies, the terms of their employment agreements will require us to gross up the executives for the amount of this excise tax plus the amount of income and other taxes due as a result of the gross up payment. Effective as of July 27, 2006, the Company entered into an amendment to its employment agreement with Bruce F. Robinson, President of the Military Housing division. Under the terms of the amendment, in the event of the occurrence of a change of control (as defined in the agreement), other than a change of control resulting from a transaction in which Gary M. Holloway, Sr. or Mr. Robinson is a majority owner or managing member of the Company (or any successor) following the transaction, then Mr. Robinson and the Company (or the buyer or acquirer in such change of control transaction) shall enter into good faith negotiations not later than 15 days following the closing of such transaction as to Mr. Robinson’s position with, and role and compensation in the post-closing business. If the parties to such negotiation have not reached an agreement and have not executed an employment agreement with respect to Mr. Robinson’s ongoing employment after the closing not later than 30 days following such closing, then Mr. Robinson shall have the right, not later than 15 days following the expiration of the 30-day period, to terminate employment with the Company and have such termination deemed to constitute “good cause” pursuant to the agreement; provided, however, that such election shall not be available in the event (i) that Mr. Robinson has become entitled to severance under any other provision of the employment agreement prior to his termination of employment, or (ii) of his death, permanent disability or the occurrence of any event that would give the Company valid reason to terminate for cause. Assuming a triggering event for these severance benefits upon termination took place as of December 31, 2006, the following payments would have been due and payable to the executive officers:

Named Executive Officer With Employment Agreements	Estimated Aggregate Payment Upon Termination For any reason other than Cause, as of December 31, 2006
Gary M. Holloway, Sr.		$	2,971,470
Chairman, President & CEO
J. Patrick O’Grady		$	1,320,000
Executive Vice President & CFO (July 1, 2006 through December 31, 2006)
Bruce F. Robinson		$	2,802,367
President of Military Housing Business
John DeRiggi		$	1,265,000
President of Student Housing Business & Chief Investment Officer
Joseph M. Macchione		$	1,100,000
Executive Vice President, General Counsel & Secretary

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Trustee Compensation

Name (a)	Fees Earned or Paid in Cash ($) (b)(1)				Share Awards ($) (c)(2)		All Other Compensation ($) (g)		Total ($) (h)
Frederick F. Buchholz		$	117,048	(1)	$	25,170		—	$	142,218
RADM James W. Eastwood (Ret)		$	168,548	(1)	$	25,170		—	$	193,718
Michael D. Fascitelli		$	29,500	(1)	$	22,606		—	$	52,106
Steven J. Kessler		$	136,500	(1)	$	25,170		—	$	161,670
Denis J. Nayden		$	34,000	(1)	$	25,170		—	$	59,170
Richard A. Silfen		$	251,815	(1)	$	25,170		—	$	276,985

(1)The aggregate cash amounts shown for each trustee include the following: Mr. Buchholz—$20,000 for annual retainer fee, $13,000 for Board meeting attendance fees, and $84,048 for Committee retainer and meeting attendance fees; Adm. Eastwood—$20,000 for annual retainer fee, $13,000 for Board meeting attendance fees, and $135,548 for Committee retainer, service and meeting attendance fees; Mr. Fascitelli—$20,000 for annual retainer fee and $9,500 for Board meeting attendance fees; Mr. Kessler—$20,000 for annual retainer fee, $13,500 for Board meeting attendance fees and $103,000 for Committee retainer, service and meeting attendance fees; Mr. Nayden—$20,000 for annual retainer fee, $12,500 for Board meeting attendance fees and $1,500 for Committee retainer and meeting attendance fees; and Mr. Silfen—$20,000 for annual retainer fee, $13,500 for Board meeting attendance fees and $218,315 for Committee retainer, service and attendance fees. Dennis O’Leary, who is also a non-employee trustee of the Company, is listed as a named executive officer in the “Summary Compensation Table” presented above, and therefore is not shown in this table.

(2)The amounts in column (c) reflect the dollar amount recognized by the Company as an expense  for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with FAS 123R of awards pursuant to the Company’s Equity Incentive Plan. All trustees shown in the table received a grant of 1,518 restricted common shares on June 30, 2006 under the Company’s Equity Incentive Plan. The grant date fair values of the awards, also computed in accordance with FAS 123(R), with respect to the 1,518 restricted shares granted to each of the trustees on June 30, 2006 was $120,042. The restricted shares all vest in three equal installments over a three-year period. Additional information relating to the annual grant of restricted shares to the Company’s non-employee trustees is provided in the narrative disclosure below this table. Both vested and un-vested restricted shares receive dividend distributions made by the Company. As of the year ended December 31, 2006, each of the non-employee trustees held the following aggregate restricted share awards: Messrs. Buchholz, Kessler, Nayden , Silfen and Adm. Eastwood each held 3,665 restricted common shares; and Mr. Fascitelli held 4,207 restricted common shares.

As compensation for serving on the Company’s Board, each non-employee trustee receives an annual fee of $40,000, of which $20,000 is paid in the form of restricted shares and $20,000 is paid in cash. The cash portion of this annual fee is paid on a quarterly pro-rata basis, and the restricted share portion of this annual fee is paid on June 30th of each fiscal year. These restricted shares vest in three equal annual installments, are considered outstanding common shares for purposes of voting along with our common shareholders, and receive dividend-equivalent cash payments along with our common shareholders. In addition, prior to 2007, non-employee trustees received $1,000 for each Board or committee meeting attended in person and $500 for each Board or committee meeting attended telephonically. Commencing on January 1, 2007, non-employee trustees will receive $1,000 for each Board or committee meeting attended either in person or telephonically. Committee chairmen receive an additional annual fee with the lead independent trustee receiving an additional $5,000 per year, the Audit Committee chairman receiving an additional $7,500 per year, and the Compensation Committee chairman and the Nominating and

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Corporate Governance Committee chairman each receiving an additional $5,000 per year. On September 15, 2006, the Board of Trustees, upon recommendation of the Nominating and Corporate Governance Committee and the Company’s management, also approved a one-time payment to members of the Audit Committee in recognition of their additional work in performing the Company’s special investigation initiated during the first quarter of 2006. These additional Audit Committee service fees were payable as follows: Mr. Kessler ($67,500); Mr. Silfen ($52,500) and Adm. Eastwood ($30,000).

The Board of Trustees also appointed a Special Committee in March 2006 to consider and analyze strategic and financial alternatives, including potential offers to acquire the Company. The Special Committee was dissolved officially in December 2006. Members of the Special Committee, which consisted of Mr. Silfen (Chairman), Mr. Buchholz and Adm. Eastwood, received the following fees: (i) an initial retainer in the amount of $10,000 for the Chairman and $5,000 for other members, (ii) for each full or partial month of service rendered by the Special Committee, a monthly retainer of $10,000 for the Chairman and $5,000 for other members, plus such other amounts as may be deemed appropriate by the Board of Trustees following the date on which these retainer fees were paid, and (iii) attendance fees for participating in meetings in the same manner as described above for standing committees ($1,000 for attendance in person, and $500 for attendance via telephone conference).

Trustees who also are officers or employees of the Company receive no additional compensation as trustees. In addition, we reimburse our trustees for their reasonable out-of-pocket expenses incurred in attending Board and committee meetings. Upon joining the Board of Trustees, each non-employee trustee receives 3,500 restricted common shares that vest in three equal annual installments. The Board of Trustees may change the compensation of non-employee trustees in its discretion, and has delegated this authority to the Nominating and Corporate Governance Committee.

Compensation Committee Interlocks and Insider Participation

All of the members of the Compensation Committee of the Company’s Board have been determined to be independent trustees in accordance with the listing standards and corporate governance rules of the NYSE and the terms of the Company’s Corporate Governance Guidelines. None of these trustees, or any of our executive officers, serves as a member of a board or any compensation committee of any entity that has one or more executive officers serving as a member of the Board of Trustees.

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Performance Graph

The following performance graph below compares the cumulative total return of the Company’s common shares with that of the S&P 500 Index and the S&P REIT Index from October 28, 2004 (the date the Company’s common shares began to trade publicly) through December 31, 2006. The performance graph assumes that a shareholder invested $100 at the close of market on October 28, 2004 in the Company’s common shares and $100 invested at that same time in each index. The comparisons in this graph are provided in accordance with SEC disclosure requirements and are not intended to forecast or be indicative of the future performance of our common shares.

COMPARISON OF CUMULATIVE TOTAL RETURN FOR THE PERIOD
OCTOBER 28, 2004 TO DECEMBER 31, 2006
(GMH COMMUNITIES TRUST, S&P 500 INDEX AND THE S&P REIT INDEX)
(includes reinvestment of dividends)

			INDEXED RETURNS
	Period		Years Ending
Company / Index	10/28/04		12/31/04		12/31/05		12/31/06
GMH COMMUNITIES TRUST		100		118.86		139.59		98.02
S&P 500 INDEX		100		107.85		113.15		131.02
S&P 500 REAL ESTATE INVESTMENT TRUSTS		100		108.79		122.46		173.59

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Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth the beneficial ownership of common shares, as of February 15, 2007, by (i) each of the Company’s trustees, (ii) each of the Company’s executive officers, (iii) all of the Company’s trustees and executive officers as a group and (iv) any shareholders known to the Company to be the beneficial owner of more than 5% of our common shares (based solely on information provided in Schedule 13D or 13G filings made by such beneficial owners with the SEC). The SEC has defined “beneficial” ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power. A shareholder is also deemed to be, as of any date, the beneficial owner of all securities that such shareholder has the right to acquire within 60 days after that date through (a) the exercise of any option, warrant or right, (b) the conversion of a security, (c) the power to revoke a trust, discretionary account or similar arrangement or (d) the automatic termination of a trust, discretionary account or similar arrangement.

Under the terms of the Company’s Declaration of Trust, shareholders generally may not have “beneficial” or “constructive” ownership (as those terms are defined in the Declaration of Trust) of more than 7.1% of the outstanding common shares of the Company at any time. Common shares indicated as beneficially owned in the following table may not be deemed to be “beneficially” and/or constructively” owned by the shareholder under the Declaration of Trust. The Declaration of Trust provides that the Board may approve exceptions to this limitation of ownership, provided that the ownership exception would not threaten the Company’s ability to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”), and currently provides the following exceptions: (i) Mr. Holloway and persons whose share ownership would be attributed to him under the Declaration of Trust’s constructive ownership provisions may own no more than 20% of the outstanding shares of the Company; (ii) Steven Roth, the chief executive officer of Vornado Realty Trust, and persons whose share ownership would be attributed to him under the Declaration of Trust’s constructive ownership rules may own no more than 8.5% of the outstanding shares of the Company, and (iii) Vornado Realty, L.P., Vornado Realty Trust, and designated affiliates or permitted transferees of Vornado Realty, L.P. under the terms of a warrant issued by the Company, generally have no restriction on ownership levels in the Company (except that any person who is treated as an “individual” for purposes of the Code may not benefit from this unlimited ownership exception).

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Name of  Beneficial Owner	Number of Shares Beneficially Owned			Percentage of Outstanding Common Shares(1)
Trustees and Executive Officers
Gary M. Holloway, Sr.(2)		17,000,379	(2)		20.0	%(2)
Bruce F. Robinson		1,014,305	(3)		2.4
John DeRiggi		251,250	(3)		*
J. Patrick O’Grady		40,000	(3)		*
Joseph M. Macchione		63,700	(3)		*
Frederick F. Buchholz		12,488	(4)		*
RADM James W. Eastwood (Ret)		103,038	(4)		*
Michael D. Fascitelli		5,552	(5)		*
Steven J. Kessler		11,488	(4)		*
Denis J. Nayden		41,488	(4)		*
Dennis J. O’Leary		53,418	(4)		*
Richard A. Silfen		12,488	(4)		*
All executive officers and trustees as a group (12 persons)		18,609,594			44.8	%(6)
5% Shareholders
Cohen & Steers(7)		4,666,151			11.2	%
FMR Corp.(8)		6,235,029			15.0	%
Franklin Resources, Inc.(9)		2,957,355			7.1	%
Heitman Real Estate Securities LLC(10)		4,771,661			11.5	%
JP Morgan Chase & Co.(11)		2,532,620			6.1	%
The Vanguard Group, Inc.(12)		2,535,083			6.1	%
Vornado Realty Trust(5)		9,855,104			20.2

* Less than 1%.

(1) Based on 41,567,146 common shares outstanding as of February 15, 2007. Under the terms of the partnership agreement of the Company’s operating partnership, units of limited partnership interest generally may be redeemed for cash or common shares after the units have been held for one year from the date such units are issued (unless otherwise agreed to be redeemed earlier at the discretion of the general partner of the operating partnership).

(2) The address for Gary M. Holloway is c/o GMH Communities Trust, 10 Campus Boulevard, Newtown Square, PA 19073. The number of common shares shown as beneficially owned by Mr. Holloway includes 11,550 common shares beneficially owned by Mr. Holloway’s wife, and includes common shares issuable upon redemption of 16,988,829 OP units that were beneficially owned by Mr. Holloway as of February 15, 2007. Under the terms of the partnership agreement of the Company’s operating partnership, Mr. Holloway may require that his and his affiliates’ units of limited partnership interest be redeemed for common shares rather than cash; provided, however, that he is limited to redeeming such units for a number of common shares equal to no more than 20% of the outstanding common shares at the time of such redemption.

(3) The number of common shares shown as beneficially owned includes common shares issuable upon redemption of the following OP units that were beneficially owned as of July 31, 2006: Bruce F. Robinson—1,010,305 units; John DeRiggi—251,250 units; and Joseph M. Macchione—62,500 units. All of the OP units held by Messrs. Robinson, DeRiggi and Macchione had been held for more than one year as of February 15, 2007 (See Footnote 1), and therefore were redeemable for common shares within 60 days. The number of common shares shown as beneficially owned by Mr. Robinson also includes 4,000 common shares held in a trust for the benefit of his children. The number of shares shown as beneficially owned by Mr. O’Grady consists of restricted common shares issued pursuant to the Company’s Equity Incentive Plan.

(4) Number of common shares presented includes 5,806 restricted common shares issued to each of the non-employee trustees under the Company’s Equity Incentive Plan. Mr. Silfen possesses shared voting and dispositive power with his spouse over 6,000 of the common shares reported as beneficially owned by him. Mr. Kessler possesses shares voting and dispositive power with his spouse over 5,000 of the common shares reported as beneficially owned by him. Admiral Eastwood’s holdings include 10,000 common shares held by his spouse.

(5) Number of common shares presented for Mr. Fascitelli includes 5,552 restricted common shares issued to him in connection with his service as a non-employee trustee under the Company’s Equity Incentive Plan. The number of common shares shown with respect to Vornado Realty Trust includes: (i) the 700,000 common shares owned by Vornado Investments L.L.C., (ii) 6,666,667 OP units issued upon exercise of a warrant held by Vornado Realty L.P., (ii) 671,190 OP units issued to Vornado CCA Gainesville, L.L.C., an affiliate of Vornado Realty Trust, and (iii) 1,817,247 common shares issued to Vornado Realty

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L.P. on May 2, 2006, in connection with a net exercise of the remaining portion of the warrant referenced above. Vornado Investments L.L.C. is a wholly-owned subsidiary of Vornado Realty L.P., which is the operating partnership of Vornado Realty Trust. Mr. Fascitelli is a Trustee and the President of Vornado Realty Trust. Mr. Fascitelli has reported in his filings with the SEC that he disclaims beneficial ownership in the 700,000 common shares held by Vornado Investments L.L.C., the 1,817,247 common shares held by Vornado Realty L.P., and the 7,337,857 OP units collectively issued to Vornado Realty L.P. and Vornado CCA Gainesville, L.L.C., except to the extent he has any pecuniary interest therein. The address of Vornado Realty Trust is 888 Seventh Avenue, New York, NY 10019.

(6) Number of common shares indicated as beneficially owned by all trustees and executive officers includes a total of 18,324,434 common shares issuable upon redemption of outstanding OP units held by Messrs. Holloway, Robinson, DeRiggi and Macchione. Includes full redemption of Mr. Holloway’s 16,988,829 outstanding OP units, although he is only permitted to redeem such units for a number of common shares equal to no more than 20% of the outstanding common shares at the time of such redemption.

(7) Based upon information contained in a Schedule 13G/A filed with the SEC reporting beneficial ownership as of February 13, 2007. The Schedule 13G was filed jointly by Cohen & Steers, Inc. and Cohen & Steers Capital Management, Inc. The address of the reporting persons is 280 Park Avenue, 10th Floor, New York, New York 10017. Cohen and Steers, Inc. and Cohen & Steers Capital Management, Inc. possessed sole voting power over 4,418,851 and sole dispositive power over 4,666,151 shares.

(8) Based upon information contained in a Schedule 13G filed with the SEC reporting beneficial ownership as of February 14, 2007. The Schedule 13G was filed jointly by FMR Corp. and Edward C. Johnson 3d. The address of the reporting person is 82 Devonshire Street, Boston, Massachusetts 02109. The Schedule 13G discloses the following regarding power to vote and dispose of the common shares: Fidelity Management & Research Company (“Fidelity”), 82 Devonshire Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 5,904,329 shares or 14.204% of the Company as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. The ownership of one investment company, Real Estate Invest Portfolio, amounted to 3,847,450 shares or 9.256% of the Common Stock outstanding. Real Estate Invest Portfolio has its principal business office at 82 Devonshire Street, Boston, Massachusetts 02109. Edward C. Johnson 3d and FMR Corp., through its control of Fidelity, and the funds each has sole power to dispose of the 5,904,329 shares owned by the Funds.Members of the family of Edward C. Johnson 3d, Chairman of FMR Corp., are the predominant owners, directly or through trusts, of Series B shares of common stock of FMR Corp., representing 49% of the voting power of FMR Corp. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B shares will be voted in accordance with the majority vote of Series B shares. Accordingly, through their ownership of voting common stock and the  execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR Corp. Neither FMR Corp. nor Edward C. Johnson 3d has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. Pyramis Global Advisors Trust Company (“PGATC”), 53 State Street, Boston, Massachusetts, 02109, an indirect wholly-owned subsidiary of FMR Corp. and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is the beneficial owner of 300,700 shares or 0.723% of the outstanding common shares of the Company as a result of its serving as investment manager of institutional accounts owning such shares. Edward C. Johnson 3d and FMR Corp., through its control of Pyramis Global Advisors Trust Company, each has sole dispositive power over 300,700 shares and sole power to vote or to direct the voting of 300,700 shares of common shares owned by the institutional accounts managed by PGATC as reported above. Fidelity International Limited (“FIL”), Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda, and various foreign-based subsidiaries provide investment advisory and management services to a number of non-U.S. investment companies and certain institutional investors. FIL, which is a qualified institution under section 240.13d-1(b)(1) pursuant to an SEC No-Action letter dated October 5, 2000, is the beneficial owner of 30,000 shares or 0.072% of the common shares outstanding of the Company. Partnerships controlled predominantly by members of the family of Edward C. Johnson 3d and FIL, or trusts for their benefit, own shares of FIL voting stock with the right to cast approximately 47% of the total votes which may be cast by all holders of FIL voting stock. FMR Corp. and FIL are separate and independent corporate entities, and their Boards of Directors are generally composed of different individuals. FMR Corp. and FIL are of the view that they are not acting as a “group” for purposes of Section 13(d) under the Securities Exchange Act of 1934 (the “1934” Act) and that they are not otherwise required to attribute to each other the “beneficial ownership” of securities “beneficially owned” by the other corporation within the meaning of Rule 13d-3 promulgated under the 1934 Act. Therefore, they are of the view that the shares held by the other corporation need not be aggregated for purposes of Section 13(d). However, FMR Corp. is making this filing on a voluntary basis as if all of the shares are beneficially owned by FMR Corp. and FIL on a joint basis.

(9) Based upon information contained in a Schedule 13G/A filed with the SEC reporting beneficial ownership as of January 31, 2007. The address of the reporting persons is One Franklin Parkway, San Mateo, CA 94403-1906. The Schedule 13G was filed jointly by Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisers, Inc. Franklin Advisers, Inc. possessed sole voting and dispositive power over 2,953,900 shares, Franklin Templeton Portfolio Advisers, Inc. possessed sole voting and dispositive power over 3,444 shares, and Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr. did not possess sole voting or dispositive power over any shares.

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(10) Based upon information contained in a Schedule 13G/A filed with the SEC reporting beneficial ownership as of February 7, 2007. The address of the reporting person is Heitman Real Estate Securities, LLC, 191 North Wacker Drive, Suite 2500, Chicago, Illinois 60606. Heitman Real Estate Securities LLC serves as sub-investment adviser to the Old Mutual Advisor Funds II Old Mutual Heitman REIT Fund, the Penn Series Funds, Inc. REIT Fund, the Old Mutual Advisor Funds OM Asset Allocation Balanced Portfolio, the Old Mutual Advisor Funds OM Asset Allocation Moderate Growth Portfolio, the Old Mutual Advisor Funds OM Asset Allocation Growth Portfolio, the Russell Investment Funds Real Estate Securities Fund and the Frank Russell Investment Company Real Estate Securities Fund, all registered investment companies, and as investment adviser to 4,750 separate account clients. The Old Mutual Advisor Funds II Old Mutual Heitman REIT Fund, the Penn Series Funds, Inc. REIT Fund, the Old Mutual Advisor Funds OM Asset Allocation Balanced Portfolio, the Old Mutual Advisor Funds OM Asset Allocation Moderate Growth Portfolio, the Old Mutual Advisor Funds OM Asset Allocation Growth Portfolio, the Russell Investment Funds Real Estate Securities Fund and the Frank Russell Investment Company Real Estate Securities Fund and 4,750 separate account clients have given dispositive power to Heitman Real Estate Securities LLC the right to receive or the power to direct the receipt of dividends from, or proceeds from the sale of 4,771,661 shares, 11.48% of this issuer. The reporting indicates that it has sole voting power over 2,179,372 shares and sole dispositive power over 4,771,661.

(11) Based upon information contained in a Schedule 13G filed with the SEC reporting beneficial ownership as of February 7, 2007. The address of the reporting person is 270 Park Avenue, New York, NY 10017. The reporting person indicates that it has sole voting power over 647,720 shares and sole dispositive power over 2,532,620 shares.

(12) Based upon information contained in a Schedule 13G filed with the SEC reporting beneficial ownership on February 14, 2007. The address of the reporting person is 100 Vanguard Blvd., Malvern, PA  19355. The Vanguard Group, Inc. possessed sole voting power over 71,454 shares and sole dispositive power over 2,535,083 shares.

Equity Incentive Plan Information

The following table gives information about the Company’s common shares that may be issued upon the exercise of options, warrants and rights under all of the Company’s existing equity compensation plans as of December 31, 2006.

Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		(b) Weighted Average Exercise Price of Outstanding Warrants, Options and Rights			(c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excludes Securities Reflected in Column (a))
Equity compensation plans approved by shareholders(1)		—		$	—		1,916,090
Equity compensation plans not approved by shareholders		—		—			—
Total		—		$	—		1,916,090

(1)Relates to the Company’s Equity Incentive Plan. The plan was approved in October 2004 by the sole shareholder of the Company prior to completion of the Company’s initial public offering. As of the date of the filing of this report, an aggregate of 43,910 restricted common shares had been granted to non-employee trustees under the Company’s Equity Incentive Plan, and 40,000 restricted common shares had been granted to an executive officer of the Company.

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

From time to time, the Company may acquire, manage or develop properties in which its trustees or executive officers have an interest. The Company may recruit other persons with experience in the student or military housing industries to join its board or management team who has financial interests in housing properties the Company intends to acquire, develop or manage. In transactions of this nature, there will be conflicts between the Company’s interests and the interest of the trustee or executive officer involved, and the Company does not intend to engage in these transactions without the approval of a majority of our independent disinterested trustees.

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Related Party Management and Other Services

In the ordinary course of the Company’s business operations, the Company has on-going business relationships with Gary M. Holloway, Sr., entities affiliated with Mr. Holloway, and entities in which Mr. Holloway or the Company has an equity investment. These relationships and related transactions are summarized below.

In connection with the Company’s initial public offering, Mr. Holloway, and various entities wholly-owned by Mr. Holloway, entered into a Contribution Agreement, dated October 18, 2004, with GMH Communities, LP, the Company’s operating partnership. Pursuant to the Contribution Agreement, Mr. Holloway contributed to the operating partnership all of the partnership interests of GMH 353 Associates, L.P., which entity’s sole asset was the corporate headquarters building located in Newtown Township, Pennsylvania. The Commonwealth of Pennsylvania and Newtown Township each impose a 1% transfer tax on the transfer of these partnership interests. During 2006, Mr. Holloway paid the Company approximately $61,000 as reimbursement for one-half of the aggregate transfer tax that was originally paid by the Company to the Commonwealth and Township in connection with transfer tax assessed against the transfer of the partnership interests. The amount paid by Mr. Holloway to the Company was recorded as a reduction to corporate assets on the Company’s balance sheet as of December 31, 2005.

Since completion of the Company’s initial public offering, the Company and certain of its employees have continued to provide services for entities that are wholly-owned or controlled by Mr. Holloway, which services include legal, IT, human resources, payroll, accounting, marketing, and costs for office equipment and furniture. These entities reimbursed the Company for these services provided during the fiscal year 2006, which totaled approximately $218,000.

The Company leases space in its corporate headquarters to entities wholly-owned by Mr. Holloway, including GMH Capital Partners, LP, an entity that provides property management services for office, retail, industrial, multi-family and corporate properties, as well as acquisition and disposition services. During the fiscal year 2006, these entities paid an aggregate of approximately $156,000 for the lease of space in the Company’s corporate headquarters.

The Company is reimbursed by the joint ventures relating to certain of its military housing projects in which the Company has an ownership interest, as well as student housing properties under the Company’s management in which Mr. Holloway was an investor through March 2005,  for the cost of certain employees engaged in the daily operation of those military housing projects and student housing properties. During the year ended December 31, 2006, such expense reimbursements relating to these military housing projects and student housing properties totaled $64.0 million.

The Company earned management fees amounting to $93,000 from properties in which Mr. Holloway was an investor during 2006.

Mr.  Holloway owns Bryn Mawr Abstract, Inc., an entity that provides title abstract services to third party title insurance companies, from which the Company has purchased title insurance with respect to student housing properties and military housing projects during 2006. In connection with the Company’s purchase of title insurance for these student housing properties and projects, the Company paid premiums to other title insurance companies, which fees in some cases are fixed according to statute. From these premiums, the other title companies paid to Bryn Mawr Abstract $373,000 during the year ended December 31, 2006 for the provision of title abstract services.

In February 2005, the Company transferred its interest in Corporate Flight Services, LLC, including the corporate aircraft and associated debt initially contributed to the Company’s operating partnership at the time of the Company’s initial public offering, back to Mr. Holloway. During the year ended December 31, 2006, the Company paid Corporate Flight Services, LLC $993,000 for use of the aircraft owned by Corporate Flight Services, LLC.

166

Review, Approval or Ratification of Transactions with Related Persons

Under the Company’s conflicts of interest policy contained in its Code of Business Conduct and Ethics, a conflict of interest exists when a person’s private interest is not aligned or appears to be not aligned, or interferes or appears to interfere, in any way with the Company’s interest. For example, the Company’s conflicts of interest policy prohibits its officers, employees and trustees from entering into agreements, transactions or business relationships, or otherwise taking actions, that involve conflicts of interest, other than such agreements, transactions or business relationships or other actions that are (i) otherwise contemplated in the prospectus relating to the Company’s initial public offering, or (ii) approved in advance by the Company’s Audit Committee. Except as otherwise permitted as described in the foregoing sentence, the Company is prohibited from, among other things, engaging in the following activities:

·acquiring any assets or other property from, or selling any assets or other property to, any of the Company’s trustees, officers or employees, any of their immediate family members or any entity in which any of the Company’s trustees, officers or employees or any of their immediate family members has an interest of 5% or more;

·making any loan to, or borrowing from, any of the Company’s trustees, officers or employees, any of their immediate family members or any entity in which any of the Company’s trustees, officers or employees or any of their immediate family members has an interest of 5% or more;

·engaging in any other transaction with any of the Company’s trustees, officers or employees, any of their immediate family members or any entity in which any of the Company’s trustees, officers or employees or their immediate family members has an interest of 5% or more; or

·permitting any of the Company’s trustees or officers to make recommendations regarding or to approve compensation decisions that will personally benefit such trustees or officers or their immediate family members whom the Company employs, other than customary compensation for service on the Company’s Board of Trustees and its committees.

In accordance with this policy, all related party transactions that would be required to be reported under Item 404(a) of Regulation S-K as promulgated by the SEC, must be approved in advance by the Audit Committee, or are otherwise deemed to be violations of the Company’s Code of Business Conduct and Ethics. In evaluating related party transactions for approval, the Audit Committee has considered the business purpose of the transaction, whether the terms of the transactions are consistent with those that could be obtained in arms-length negotiations with unaffiliated third-parties, the dollar value of the individual transaction and the aggregate dollar value of all related party transactions with the related party. A copy of the Company’s Code of Business Conduct and Ethics may be viewed on the Corporate Governance section of the “Investor Relations” page on the Company’s web site at www.gmhcommunities.com.

Trustee Independence.   Our Board currently consists of nine members, two of whom were executive officers as of March 15, 2007, and five of whom our Board has determined are “independent,” with independence being defined in the manner established by our Board and in a manner consistent with corporate governance rules established by the NYSE. These independent trustees are Messrs. Buchholz, Eastwood, Kessler, Nayden and Silfen. Our Board has adopted categorical standards, which are contained in our Corporate Governance Guidelines and conform to the independence standards established by the NYSE, to assist it in making determinations of independence. Our Corporate Governance Guidelines require that at all times a majority of the members of our Board be independent.

167

Item 14.   Principal Accountant Fees and Services.

Ernst & Young LLP served as the Company’s independent public accountants, and principal registered public accounting firm, from the Company’s formation in May 2004 through September 15, 2006. During its engagement with the Company throughout 2006, Ernst & Young LLP performed certain non-audit services for the Company. The Audit Committee considered whether the provision of these non-audit services was compatible with maintaining the accountants’ independence. The Audit Committee discussed these services with representatives of Ernst & Young LLP and management to determine that they were permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as by the American Institute of Certified Public Accountants.

On September 29, 2006, the Audit Committee of the Board approved of the appointment of Reznick Group, P.C. as the Company’s new independent public accountants and principal registered public accounting firm. During its engagement with the Company throughout 2006, Reznick Group, P.C. performed certain non-audit services for the Company. The Audit Committee considered whether the provision of these non-audit services was compatible with maintaining the accountants’ independence. The Audit Committee discussed these services with representatives of Reznick Group, P.C. and management to determine that they were permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as by the American Institute of Certified Public Accountants.

The following table presents the aggregate fees billed by Ernst & Young LLP for the most recent fiscal years ended December 31, 2005 and 2006:

	2005		2006
Audit Fees(1)	$	3,334,718	$	975,345
Audit-Related Fees(2)	$	160,000	$	12,500
Tax Fees(3)	$	273,099	$	288,312
All Other Fees	-0-		$	-0-
Total fees	$	3,767,817	$	1,276,157

(1)Fees for audit services in 2005 and 2006 related to (i) audits of our annual financial statements and all related financial statements required to be audited pursuant to regulatory filings, including student housing property and/or portfolio acquisitions, (ii) reviews of unaudited quarterly financial statements, and (iii) services related to the issuance of comfort letters, consents and other services related to SEC matters.

(2)Fees for audit-related services billed in 2005 and 2006 included military housing joint venture audits and financial accounting and reporting consultations in connection with the Company’s student housing acquisitions.

(3)Fees for tax services relating to tax compliance services and tax planning and advice services, including preparation of tax returns for the fiscal years ended December 31, 2005 and December 31, 2006.

168

The following table presents the aggregate fees billed by Reznick Group, P.C. for the most recent fiscal years ended December 31, 2005 and 2006:

	2005		2006
Audit Fees(1)	-0-		$	1,000,000
Audit-Related Fees(2)	$	64,075	110,000
Tax Fees(3)	5,000		10,000
All Other Fees	-0-		-0-
Total fees	$	69,075	$	1,120,000

(1)Fees for audit services in 2006 related to (i) audits of our annual financial statements and all related financial statements required to be audited pursuant to regulatory filings, including student housing property and/or portfolio acquisitions, (ii) reviews of unaudited quarterly financial statements, and (iii) services related to the issuance of comfort letters, consents and other services related to SEC matters.

(2)Fees for audit-related services billed in 2005 and 2006 included military housing joint venture audits.

(3)Fees for tax services relating  to our military housing joint ventures.

The Audit Committee has pre-approved certain specific audit and non-audit services to be provided to the Company by the independent auditors during 2007, based on a pre-approved maximum dollar amount per service and maximum quarterly threshold for each service. In connection with this pre-approval process, the independent auditors provided the Audit Committee with a list that described in reasonable detail the services expected to be performed by the independent auditor during 2007. Any request for services not contemplated by this list must be submitted to the Audit Committee for specific pre-approval and the provision of such services cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. All audit, audit-related, tax and other services were pre-approved by the Audit Committee.

The Company expects that a representative from Reznick Group, P.C. will attend the 2007 Annual Meeting of Shareholders. Such representative will have an opportunity to make a statement, if he or she desires, and will be available to respond to appropriate questions from shareholders.

169

PART IV

Item 15.   Exhibits and Financial Statement Schedules.

(a)Financial Statements.

The consolidated and combined financial statements of GMH Communities Trust and the GMH Predecessor Entities for the year ended December 31, 2006 are included in Part II, Item 8 of this report.

(b)Exhibits Required by Item 601 of Regulation S-K.

Exhibit	Description of Document
3.1	Articles of Amendment and Restatement of Declaration of Trust of the Registrant (Incorporated by reference from the Registrant’s Amendment No. 7 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 27, 2004, as amended (File No. 333-116343)).
3.2	Bylaws of the Registrant (Incorporated by reference from the Registrant’s Amendment No. 7 to its Registration Statement on Form S- 11 filed with the Securities and Exchange Commission on October 27, 2004, as amended (File No. 333-116343)).
3.3	Second Amended and Restated Agreement of Limited Partnership of GMH Communities, LP (Incorporated by reference from the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 8, 2004).
10.1	Contribution Agreement, dated July 27, 2004, by and among GMH Communities, LP, GMH Communities GP, LLC and GMH LP LLC. (Incorporated by reference from the Registrant’s Amendment No. 1 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on August 11, 2004, as amended (File No. 333-116343)).
10.2	Warrant, dated July 27, 2004, as amended on October 28, 2004, issued to Vornado Realty LP, by GMH Communities Trust and GMH Communities, LP. (Incorporated by reference from the Registrant’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 29, 2004).
10.3*	Employment Agreement by and between the Registrant and Gary M. Holloway, Sr. (Incorporated by reference from the Registrant’s Amendment No. 7 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 27, 2004, as amended (File No. 333-116343)).
10.4*	Employment Agreement by and between the Registrant and Bruce F. Robinson (Incorporated by reference from the Registrant’s Amendment No. 7 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 27, 2004, as amended (File No. 333-116343)).
10.5*	Employment Agreement by and between the Registrant and John DeRiggi. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).
10.6*	Employment Agreement by and between the Registrant and Joseph M. Macchione (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).
10.7*	Employment Agreement by and between the Registrant and J. Patrick O’Grady (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).

170

Exhibit	Description of Document
10.8*	GMH Communities Trust Deferred Compensation Plan (Incorporated by reference from the Registrant’s Amendment No. 7 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 27, 2004, as amended (File No. 333-116343)).
10.9*	GMH Communities Trust Equity Incentive Plan (Incorporated by reference from the Registrant’s Amendment No. 7 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 27, 2004, as amended (File No. 333-116343)).
10.10	Contribution Agreement, effective as of October 18, 2004, by and among GMH Communities, LP, Corporate Flight Services, Inc., GH 353 Associates, Inc., LVWD, Ltd., GMH Capital Partners Asset Services, LP and Gary M. Holloway, Sr. (Incorporated by reference from the Registrant’s Amendment No. 6 to its Registration Statement on Form S-11 filed with the Securities and Exchange Commission on October 26, 2004, as amended (File No. 333-116343)).
10.11	Form of Restricted Common Shares Award Agreement for Non-Employee Trustees (Incorporated by reference from the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on January 5, 2005 (File No. 333-121853)).
10.12	Form of Restricted Common Shares Award Agreement for Employees pursuant to the GMH Communities Trust Equity Incentive Plan (Incorporated by reference from the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on January 5, 2005 (File No. 333-121853)).
10.13	Membership Interest Purchase Agreement, effective as of February 28, 2005, by and between GMH Military Housing, LLC and Gary M. Holloway, Sr. (Incorporated by reference from the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 1, 2005).
10.14	Agreement of Sale, dated as of March 22, 2005, by and among Whitehall Street Real Estate Limited Partnership IX, Bridge Street Real Estate Fund 1998, L.P., W9/JP-M Gen-Par Inc., Stone Street W9/JP-M Corp., Stone Street Real Estate Fund 1998, L.P., GHJP, Inc., Nittany Crossing Intermediate, LLC and GMH Communities, LP, and the individuals as signatories thereto (Incorporated by reference from the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 28, 2005).
10.15	Agreement of Sale, dated as of March 22, 2005, by and among Whitehall V-S Real Estate Limited Partnership V, Stone Street GMH-S Corp., Stone Street Real Estate Fund 1996, L.P., Bridge Street Real Estate Fund 1996, L.P., State College Park Intermediate, LLC and GMH Communities, LP, and the individuals as signatories thereto (Incorporated by reference from the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 28, 2005).
10.16	Contribution Agreement, dated as of March 22, 2005, by and among GMH Communities, LP and Gary M. Holloway, Sr., Bruce F. Robinson, Joseph M. Coyle, Denise Hubley and Robert DiGiuseppe (Incorporated by reference from the Registrant’s Current Report on Form 8- K, as filed with the Securities and Exchange Commission on March 28, 2005).

171

Exhibit	Description of Document
10.17	Contribution Agreement, dated as of March 22, 2005, by and among GMH Communities, LP and Gary M. Holloway, Sr., Bruce F. Robinson, Joseph M. Coyle, Denise Hubley and Robert DiGiuseppe (Incorporated by reference from the Registrant’s Current Report on Form 8- K, as filed with the Securities and Exchange Commission on March 28, 2005).
10.18	Aircraft Lease Agreement, effective as of August 11, 2005, by and among Corporate Flight Services, LLC, College Park Management, LLC, GMH Military Housing Management, LLC and GMH Communities, LP (Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the Securities and Exchange Commission on November 14, 2005).
10.19	Second Amendment and Waiver to Credit Agreement, dated August 10, 2005, by and among GMH Communities, LP, GMH Communities Trust (“Trust”), each subsidiary of the Trust that becomes a borrower, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the following lenders: Eurohypo AG, New York Branch, JPMorgan Chase Bank, Deutsche Bank Trust Company Americas, Merrill Lynch Bank USA, Morgan Stanley Bank, and Bank Midwest. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, as filed with the SEC on August 12, 2005).
10.20	Full Service Lease, dated November 2, 2004, by and among 353 Associates; GMH Capital Partners Commercial Realty Services, LP; GMH Capital Partners Asset Services, LP; GMH Philadelphia Barrage, LLC; GMH Construction Company, Inc. and GMH Associates, Inc. (Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the Securities and Exchange Commission on November 14, 2005).
10.21	First Amendment to Lease, effective as of November 1, 2005, by and among 353 Associates, L.P., GMH Capital Partners Commercial Realty Services, LP, GMH Capital Partners Asset Services, LP, GMH Philadelphia Barrage, LLC, GMH Construction Company, Inc. and GMH Associates, Inc. (Incorporated by reference from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the Securities and Exchange Commission on November 14, 2005).
10.22	Full Service Lease, effective as of November 2, 2004, by and between 353 Associates, L.P. and GMH Military Housing, LLC. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).
10.23	Full Service Lease, effective as of November 2, 2004, by and between 353 Associates, L.P. and GMH Communities, LP. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).
10.24	Confidential Separation Agreement and General Release, as of December 31, 2005, by and between GMH Communities Trust and Joseph M. Coyle. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).
10.25	Consulting Agreement, as of January 1, 2006, by and between GMH Communities Trust and Joseph M. Coyle d/b/a Joseph M. Coyle Enterprises, Inc. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).

172

Exhibit	Description of Document
10.26*	First Amendment to Employment Agreement, dated as of July 23, 2006, by and between GMH Communities Trust and Bruce F. Robinson. (Incorporated by reference from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on July 31, 2006).
10.27	Form of Agreement of Sale between College Park Investments, LLC and entities affiliated with Capstone Properties. (Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.28	First Amendment of Agreements of Sale and Deposit and Escrow Agreement, entered into as of July 27, 2006, by and among College Park Investments, LLC, each of University Commons-East Lansing, Ltd., Capstone Commons-Athens, Ltd., University Commons-Baton Rouge, Ltd., University Commons-Bloomington, IN., Ltd., University Commons-Columbia, S.C., L.P., University Commons-Eugene, OR., Ltd., University Commons-Lexington, KY., Ltd., University Commons-Ohio, Ltd., University Commons-Starkville, Ltd., University Commons-Tuscaloosa, Ltd., University Commons-Urbana, IL., Ltd. (Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.29	Second Amendment of Agreements of Sale, by and among College Park Investments, LLC and each of University Commons-East Lansing, Ltd., Capstone Commons-Athens, Ltd., University Commons-Baton Rouge, Ltd., University Commons-Bloomington, IN., Ltd., University Commons-Columbia, S.C., L.P., University Commons-Eugene, OR., Ltd., University Commons-Lexington, KY., Ltd., University Commons-Ohio, Ltd., University Commons-Starkville, Ltd., University Commons-Tuscaloosa, Ltd., University Commons-Urbana, IL., Ltd. (Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.30	Third Amendment and Waiver to Credit Agreement, dated September 1, 2006, by and among GMH Communities, LP, the Registrant, each subsidiary of the Registrant that becomes a borrower, Bank of America, N.A., as Lender, Administrative Agent, Swing Line Lender and L/C Issuer and each lender party to the Credit Agreement (Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006).
10.31	Loan Agreement, dated as of October 2, 2006, between GMH Communities, LP, as Borrower, and Wachovia Bank, National Association, as Lender. (Filed herewith).
10.32	First Amendment to Loan Agreement, dated as of October 31, 2006, between GMH Communities, LP and Wachovia Bank, National Association. (Filed herewith).
10.33	Second Amendment to Loan Agreement, dated as of February 6, 2007, between GMH Communities, LP and Wachovia Bank, National Association. (Filed herewith).
10.34	Pledge Agreement, dated as of October 2, 2006, by GMH Communities, LP, Savoy Village Associates Intermediate, LLC, Croyden Avenue Associates Intermediate, LLC, Monks Road Associates Intermediate, LLC, South Carolina Associates Intermediate, LLC, Reno Associates Intermediate, LLC, Denton Associates Intermediate, LLC, Lankford Drive Associates Intermediate, LLC, Campus View Drive Associates Intermediate, LLC and the entities assuming the agreement in accordance with Section 20 thereof, and College Park Investments, LLC, in favor of Wachovia Bank, National Association. (Filed herewith).

173

Exhibit	Description of Document
10.35	Security Agreement, dated as of October 2, 2006, by GMH Communities, LP, College Park Management, LLC, GMH Communities Services, Inc., GMH Communities Trust, GMH Communities TRS, Inc., GMH Military Housing Investments, LLC, College Park Management TRS, Inc., and GMH Military Housing, LLC, in favor of Wachovia Bank, National Association. (Filed herewith).
10.36	Guaranty, dated as of October 2, 2006, by GMH Communities Trust for the benefit of Wachovia Bank, National Association. (Filed herewith).
10.37	Guaranty, dated as of October 2, 2006, by each of the parties as signatory thereto, for the benefit of Wachovia Bank, National Association. (Filed herewith).
10.38	Promissory Note, dated as of October 2, 2006, executed by GMH Communities, LP, in favor of Wachovia Association, National Association. (Filed herewith).
21.1	Subsidiaries of the Registrant. (Filed herewith).
23.1	Consent of Ernst & Young LLP. (Filed herewith).
23.2	Consent of Reznick Group, P.C. (Filed herewith).
31.1	Certifications of Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. (furnished herewith)
31.2	Certifications of Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. (furnished herewith)
32.1	Certifications of Principal Executive Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
32.2	Certifications of Principal Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

*Management contract or compensatory agreement.

(c)Financial Statement Schedules.

The following financial statement schedules should be read in conjunction with the financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Schedule II—Valuation and Qualifying Accounts

Schedule III—Real Estate and Accumulated Depreciation

Financial Statements and Independent Auditor’s Report for Fort Carson Family Housing , LLC for the year ended December 31, 2006.

174

GMH Communities Trust
Schedule II
Valuation and Qualifying Accounts
(dollars in thousands)

Description	Balance beginning of Period			Additions Charged to Cost and Expenses			Write Off of Accounts				Balance at End of Period
Allowance for doubtful accounts:
Year ended December 31, 2006		$	710		$	2,693		$	(3,072	)		$	331
Year ended December 31, 2005		$	159		$	1,632		$	(1,081	)		$	710
Year ended December 31, 2004		$	—		$	159		$	—			$	159

175

GMH Communities Trust

Schedule III—Real Estate and Accumulated Depreciation
(dollars in thousands)

Costs

Capitalized

Subsequent to

Gross Amount at Which Carried at Close of Period

Initial Cost

Acquisition

December 31, 2006(3)

Buildings

Buildings

Buildings

# of

Encumbrances

and

and

and

Accumulated

Date of

Year

Depreciable

Property Name

Address

Location

Beds

at 31-Dec-06

Land

Furniture

Land

Furniture

Land

Furniture

Total

Depreciation

Construction

Acquired

Life, in years

Investments in student housing properties
University Crescent	4500 Burbank Drive	Baton Rouge, LA	660	15,569	$ 1,562	$  19,052	$  —	$          356	$     1,562	$ 19,408	$ 20,970	$       (1,369)	1999	2004	(2)
University Greens	2900 Oak Tree Avenue	Norman, OK	516	7,710	947	11,588	—	881	947	12,469	13,416	(909)	1999	2004	(2)
University Heights	1319 Knotty Pine Way	Knoxville, TN	636	11,966	1,122	13,689	—	300	1,122	13,989	15,111	(1,000)	1999	2004	(2)
University Lodge	2024 Binford Street	Laramie, WY	481	10,663	925	11,931	—	116	925	12,047	12,972	(850)	2002	2004	(2)
University Pines	122 Lanier Drive	Statesboro, GA	552	12,557	1,210	13,974	—	214	1,210	14,188	15,398	(1,004)	2001	2004	(2)
University Trails	2210 Main Street	Lubbock, TX	684	15,725	5,921	19,993	—	223	5,921	20,216	26,137	(1,475)	2003	2004	(2)
University Court	4915 Belle Chase Boulevard	East Lansing, MI	516	13,737	1,081	15,057	—	199	1,081	15,256	16,337	(1,070)	2001	2004	(2)
University Estates	4500 W. Bethel Avenue	Muncie, IN	552	10,239	752	11,686	—	208	752	11,894	12,646	(844)	2001	2004	(2)
University Gables	2827 S. Rutherford Boulevard	Murfreesboro, TN	648	15,843	778	17,528	—	322	778	17,850	18,628	(1,248)	2001	2004	(2)
University Glades	3443 Southwest 39th Boulevard	Gainesville, FL	432	10,315	1,134	10,465	—	449	1,134	10,914	12,048	(803)	2000	2004	(2)
University Manor	3535 E. 10th Street	Greenville, NC	600	14,600	1,615	16,042	—	67	1,615	16,109	17,724	(1,133)	2002	2004	(2)
University Mills	2124 W. 27th Street	Cedar Falls, IA	481	9,022	1,313	11,556	—	38	1,313	11,594	12,907	(820)	2002	2004	(2)
University Place	100 Wahoo Way	Charlottesville, VA	528	14,001	1,387	16,838	—	79	1,387	16,917	18,304	(1,186)	2003	2004	(2)
Collegiate Hall	500 Palisades Drive	Birmingham, AL	528	9,908	1,369	14,380	—	301	1,369	14,681	16,050	(1,039)	2001	2004	(2)
Campus Club—Statesboro	211 Lanier Drive	Statesboro, GA	984	18,811	2,089	28,429	—	117	2,089	28,546	30,635	(1,950)	2003	2004	(2)
Campus Edge	105 Doleac Drive	Hattiesburg, MS	552	9,662	1,592	14,005	—	199	1,592	14,204	15,796	(908)	2003	2004	(2)
Campus Connection(1)	1601 North Linclon Avenue	Urbana, IL	864	14,193	2,248	20,388	—	657	2,248	21,045	23,293	(1,380)	1998	2004	(2)
University Fields	200 Curtis Street	Savoy, IL	588	—	1,319	17,061	—	150	1,319	17,211	18,530	(1,077)	1999	2004	(2)
University Oaks	21 National Guard Rd	Columbia, SC	662	—	1,734	23,442	—	173	1,734	23,615	25,349	(1,471)	2004	2004	(2)
University Pointe	2323 Glenna Goodacre Blvd.	Lubbock, TX	682	21,300	5,929	23,442	—	214	5,929	23,656	29,585	(1,513)	2004	2004	(2)
Chapel Ridge	101 Legacy Terrace	Chapel Hill, NC	544	16,180	1,748	24,490	—	288	1,748	24,778	26,526	(1,618)	2003	2004	(2)
University Centre	5200 Croyden Avenue	Kalamazoo, MI	700	—	1,599	24,585	—	151	1,599	24,736	26,335	(1,550)	2004	2004	(2)
The Summit	1801 Monks Avenue	Mankato, MN	672	—	1,291	22,151	—	290	1,291	22,441	23,732	(1,382)	2003	2004	(2)
University Highlands	2800 Enterprise Blvd	Reno, NV	732	—	4,744	27,759	—	156	4,744	27,915	32,659	(1,753)	2004	2004	(2)
University Uptown	2601 West Oak	Denton, TX	528	—	2,574	19,617	—	100	2,574	19,717	22,291	(1,240)	2004	2004	(2)
Grand Marc at University Village	3549 Iowa Avenue	Riverside, CA	824	42,091	—	54,655	—	360	—	55,015	55,015	(3,381)	2001	2004	(2)
The Verge	6730 4th Avenue	Sacramento, CA	792	31,400	3,894	47,369	—	74	3,894	47,443	51,337	(2,517)	2004	2005	(2)
WillowTree Apartments	1819 Willowtree Lane	Ann Arbor, MI	572	15,456	1,843	22,438	—	1,789	1,844	24,226	26,070	(1,398)	1967-1968	2005	(2)
WillowTree Towers	1819 Willowtree Lane	Ann Arbor, MI	283	7,562	875	10,661	—	106	875	10,767	11,642	(632)	1974	2005	(2)
Campus Walk	401 Hathorn Road	Oxford, MS	432	8,133	1,469	11,758	—	192	1,469	11,950	13,419	(736)	2001	2004	(2)
Pirate’s Cove	3305 East 10th Street	Greenville, NC	1,056	20,971	2,243	28,595	—	372	2,243	28,967	31,210	(1,716)	2000	2004	(2)
University Walk	1205 University Walk Circle	Charlotte, NC	480	10,559	1,004	14,276	—	475	1,004	14,751	15,755	(862)	2002	2004	(2)
Campus Club—Gainesville	4000 S.W. 37th Boulevard	Gainesville, FL	924	18,475	1,479	26,953	—	434	1,479	27,387	28,866	(1,772)	1997	2004	(2)
The Enclave	706 Napolean Road	Bowling Green, OH	480	10,062	1,144	12,423	—	152	1,144	12,575	13,719	(651)	2002	2005	(2)
The Ridge	350 Wedgewood Drive	Morgantown, WV	644	15,370	1,828	20,435	—	166	1,828	20,601	22,429	(1,056)	2002	2005	(2)
The View	301 West Charleston Street	Lincoln, NE	588	9,160	822	11,119	—	258	822	11,377	12,199	(630)	2003	2005	(2)

176

Costs

Capitalized

Subsequent to

Gross Amount at Which Carried at Close of Period

Initial Cost

Acquisition

December 31, 2006(3)

Buildings

Buildings

Buildings

# of

Encumbrances

and

and

and

Accumulated

Date of

Year

Depreciable

Property Name

Address

Location

Beds

at 31-Dec-06

Land

Furniture

Land

Furniture

Land

Furniture

Total

Depreciation

Construction

Acquired

Life, in years

Investments in student housing properties
State College Park	348 Blue Course Drive	State College, PA	752	11,759		1,456		17,669		—		264			1,456		17,933		19,389		(923)			1991	2005	(2)
Nittany Crossing	601 Vairo Boulevard	State College, PA	684	11,830		1,450		17,604		—		195			1,450		17,799		19,249		(923)			1996	2005	(2)
Grand Marc at Seven Corners	1849 Washington Avenue South	Minneapolis, MN	440	18,867		3,616		24,276		—		1,003			3,616		25,279		28,895		(1,259)			2000	2005	(2)
Campus Edge I	1300 Varsity Lane	Charlotte, NC	384	9,849		1,205		14,650		—		(3		)	1,205		14,647		15,852		(672)			1998	2005	(2)
Campus Edge II	1300 Varsity Lane	Charlotte, NC	336	4,456		508		6,823		—		19			508		6,842		7,350		(313)			1999	2005	(2)
Chapel View	2701 Homestead Road	Chapel Hill, NC	358	9,690		2,510		12,584		—		974			2,510		13,558		16,068		(638)			1986	2005	(2)
Campus Ridge Apartments(1)	1301 Seminole Drive	Johnson City, TN	528	7,401		693		8,393		—		1,983			693		10,376		11,069		(469)			2000	2005	(2)
Southview Apartments	1068-N Lois Lane	Harrisonburg, VA	960	18,918		1,668		28,007		—		344			1,668		28,351		30,019		(1,258)			1996-1998	2005	(2)
Stonegate Apartments	1820 Putter Court	Harrisonburg, VA	672	14,264		1,271		21,136		—		479			1,271		21,615		22,886		(958)			1999-2000	2005	(2)
The Commons	869 Port Republic Road	Harrisonburg, VA	528	6,362		773		12,477		—		179			773		12,656		13,429		(539)			1991	2005	(2)
University Crossing	2215 College Avenue	Manhattan, KS	700	11,433		1,148		17,033		—		416			1,148		17,449		18,597		(771)			1997	2005	(2)
Seminole Suites	2421 Jackson Bluff Road	Tallahasee, FL	924	20,400		2,589		30,359		5		213			2,594		30,572		33,166		(1,257)			2004	2005	(2)
Blanton Commons	1505 Lankford Drive	Valdosta, GA	596	—		1,885		22,961		—		307			1,885		23,268		25,153		(898)			2005	2005	(2)
The Towers at Third	302 East John Street	Champaign, IL	295	14,491		4,589		18,338		3		1,268			4,592		19,606		24,198		(779)			1973	2005	(2)
Campus Walk - UNCW	455 Racine Drive	Wilmington, NC	290	6,700		1,812		8,432		—		212			1,812		8,644		10,456		(344)			1990	2005	(2)
University Crossing (Conrail)	3175 JFK Boulevard	Philadelphia, PA	1,026	44,065		10,850		49,374		—		1,591			10,850		50,965		61,815		(2,005)			1929/2003(5)	2005	(2)
University Meadows	4310 Sterling Way	Mount Pleasant, MI	616	9,633		639		13,261		—		192			639		13,453		14,092		(500)			2001	2005	(2)
Pegasus Connection	11841 Jefferson Commons Circle	Orlando, FL	930	29,914		4,596		43,762		—		521			4,596		44,283		48,879		(1,518)			2000	2005	(2)
University Village -Royal Riverwood	7767 La Riviera Drive	Sacramento, CA	394	14,740		5,990		15,687		—		934			5,990		16,621		22,611		(509)			1979/2006(5)	2006	(2)
Jacob Heights	1801 Monks Avenue	Mankato, MN	162	3,850		430		5,874		—		51			430		5,925		6,355		(174)			2004	2006	(2)
The Commons on Oak Tree	1111 Oak Tree Avenue	Norman, OK	780	11,729		2,050		16,380		—		403			2,050		16,783		18,833		(462)			1995	2006	(2)
Lion’s Crossing	201 Vairo Boulevard	Aspen, GA	696	8,823		2,860		17,083		—		681			2,860		17,764		20,624		(441)			1996	2006	(2)
The Club	425 Riverbend Parkway	Wilmington, NC	480	10,161		2,002		10,585		—		373			2,002		10,958		12,960		(305)			1989/2001(5)	2006	(2)
Brookstone Village	420 Racine Drive	State College, PA	238	4,141		950		5,168		—		49			950		5,217		6,167		(145)			1994	2006	(2)
Stadium Suites	112 Silo Court	Columbia, SC	924	27,365		4,750		31,169		—		81			4,750		31,250		36,000		(609)			2004	2006	(2)
Aztec Corner	5504 Montezuma Road	San Diego, CA	600	28,600		10,400		26,978		—		969			10,400		27,947		38,347		(393)			1997-2005(6)	2006	(2)
Jacob Heights III	1801 Monks Avenue	Mankato, MN	96	2,948		210		3,674		—		—			210		3,674		3,884		(44		)	2006	2006	(2)
Cambridge at Southern	130 Lanier Drive	Athens, GA	564	18,388		1,900		22,331		—		24			1,900		22,355		24,255		(54)			2006	2006	(2)
Lakeside	1000 Lakeside Drive	Starkville, MS	772	14,100		1,448		16,297		—		21			1,448		16,318		17,766		(117)			1991	2006	(2)
Campus Trails	1000 Campus View Drive	Bloomington, IN	480	7,486		1,763		8,583		—		21			1,763		8,604		10,367		(63)			1997	2006	(2)
Campus Corner	1150 Clarizz Boulevard	Oxford, OH	792	22,266		1,598		26,717		—		26			1,598		26,743		28,341		(192)			1994	2006	(2)
Hawk’s Landing	5262 Brown Road	Lexington, KY	484	15,600		847		19,575		—		17			847		19,592		20,439		(140)			1996	2006	(2)
The Courtyards	845 Red Mile Road	Tuscaloosa, AL	676	16,875		2,243		19,106		—		18			2,243		19,124		21,367		(138)			1993	2006	(2)
Campus Way	301 Helen Keller Boulevard	Urbana, IL	676	15,375		1,439		18,145		—		28			1,439		18,173		19,612		(131)			1998	2006	(2)
Lincoln View	1321 North Lincoln Avenue	Columbia, SC	732	16,575		2,200		18,465		—		22			2,200		18,487		20,687		(89)			1994/1999(7)	2006	(2)
Riverside Estates	800 Alexander Road	Baton Rouge, LA	700	16,200		3,659		15,560		—		27			3,659		15,587		19,246		(114)			1995	2006	(2)
Burbank Commons	4600 Burbank Drive	East Lansing, MI	532	14,887		2,908		15,982		—		27			2,908		16,009		18,917		(116)			1999	2006	(2)
Abbott Place	2501 Abbott Road	Eugene, OR	654	17,850		3,659		18,917		—		22			3,659		18,939		22,598		(138)			1999	2006	(2)
Campus Commons	90 Commons Drive	Statesboro, GA	696	16,148		2,635		19,543		—		25			2,635		19,568		22,203		(140)			1991/1993(7)	2006	(2)
Orchard Trails(8)	4 Empire Drive	Orono, ME		15,938		1,812		—		—		23,279			1,812		23,279		25,091		—
The Enclave II(8)	706 Napolean Road	Bowling Green, OH	—	11,273		980		—		—		12,582			980		12,582		13,562		(374)			2006	2005	(2)
Huntsville Land(9)	Various	Huntsville, TX	—	—		1,995		—		—		—			1,995		—		1,995		—			—	2006	—
Contruction in process	Various	Various	—	—		—		—		—		1,593			—		—		1,593		—			—	—	—
Total investments in student housing properties			45,544	1,022,590		168,570		1,428,788		8		62,056			168,579		1,489,250		1,659,422		(66,855)
Corporate assets
Corporate headquarters(4)	10 Campus Boulevard	Newtown Square, PA	—	$	5,700	2,096		4,874		—		327			2,096		5,201		7,297		(310)			2000	2004	(2)
Total investment in real estate and corporate assets			45,544	$	1,028,29	$	170,666	$	1,433,662	$	8	$	62,383		$	170,675	$	1,494,451	$	1,666,719	$	(67,165)

177

Notes:

(1)Includes an undeveloped parcel of land.

(2)Depreciation is computed based on the following estimated lives:

Land	No depreciation
Buildings	40 years
Building Improvements	3-10 years
Furniture, Fixtures and Equipment	3-5 years

(3)At December 31, 2006, the aggregate net carrying amount for land and buildings and improvements for federal income tax reporting was approximately $1.5 billion.

(4)Includes land and building as reported in our Corporate Segment. This balance excludes certain technology equipment, furniture and other capital assets that are non real estate related.

(5)Year Built/ Year Renovated

(6)Built in three phases (1997, 2001, 2005)

(7)Built in two phases

(8)The Company currently holds a 10% interest through a joint venture on these properties.

(9)Includes five undeveloped parcels of land

Summary of Real Estate and Accumulated Depreciation Activity:

	2006	2005	2004
Balance beginning of period	1,217,164	645,605	6,970
Additions during the period:
Acquisitions	409,756	549,139	638,464
Capital expenditures	38,206	4,115	171
Construction in progress	1,593	18,305	—
Write off fully depreciated assets
Dispositions
Balance at close of period	1,666,719	1,217,164	645,605
Balance beginning of period	29,203	3,928	—
Depreciation expense	37,962	25,275	3,928
Write off fully depreciated assets	—	—	—
Dispositions	—	—	—
Balance at close of period	67,165	29,203	3,928

178

FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS’ REPORT

FORT CARSON FAMILY HOUSING, LLC

December 31, 2006

179

Fort Carson Family Housing, LLC

TABLE OF CONTENTS

	PAGE
INDEPENDENT AUDITORS’ REPORT	181
FINANCIAL STATEMENTS
BALANCE SHEET	182
STATEMENT OF OPERATIONS	183
STATEMENT OF CHANGES IN MEMBERS’ EQUITY (DEFICIT)	184
STATEMENT OF CASH FLOWS	185
NOTES TO FINANCIAL STATEMENTS	186

180

INDEPENDENT AUDITORS’ REPORT

To the Members
Fort Carson Family Housing, LLC

We have audited the accompanying balance sheet of Fort Carson Family Housing, LLC, as of December 31, 2006, and the related statements of operations, changes in members’ equity, and cash flows for the year then ended. These financial statements are the responsibility of Fort Carson Family Housing, LLC’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fort Carson Family Housing, LLC as of December 31, 2006, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ REZNICK GROUP, P.C.

Atlanta, Georgia
March 15, 2007

181

Fort Carson Family Housing, LLC
BALANCE SHEET
December 31, 2006

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,999,309
Tenant accounts receivable, net of allowance for doubtful accounts of $170,694	2,444,494
Other receivables	51,542
Total current assets	4,495,345
RESTRICTED DEPOSITS AND FUNDED RESERVES
Bond reserves held by trustee	121,543,814
Total deposits held in trust—funded	121,543,814
RENTAL PROPERTY
Leasehold improvements	148,535,379
Land improvements	32,278,994
Furniture and fixtures	8,455,528
Construction in progress	6,495,473
	195,765,374
Less accumulated depreciation	(33,659,444		)
	162,105,930
OTHER ASSETS
Intangible assets, net of accumulated amortization of $736,973	5,981,142
Total other assets	5,981,142
	$	294,126,231
LIABILITIES & MEMBERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable	$	1,898,359
Accrued liabilities	294,015
Accrued management fee payable	381,048
Accrued interest payable	883,030
Development costs payable	1,592,732
Note payable—current portion	2,385,000
Prepaid rent	111,088
Total current liabilities	7,545,272
LONG-TERM LIABILITIES
Notes payable, net of current portion	258,345,000
Total long-term liabilities	258,345,000
COMMITMENTS AND CONTINGENCIES	—
MEMBERS' EQUITY	28,235,959
	$	294,126,231

See notes to financial statements

182

Fort Carson Family Housing, LLC
STATEMENT OF OPERATIONS
For the year ended December 31, 2006

RENTAL REVENUE
Rent revenue—net	$	30,850,335
Miscellaneous revenue	83,536
Total rental revenue	30,933,871
OPERATING EXPENSES
Advertising and marketing	82,020
Amortization expense	114,078
Depreciation expense	7,363,193
Bad debt expense	245,657
Benefits	274,326
Insurance expense	726,630
Legal expense	150,174
Maintenance & repairs	1,000,780
Management fees	1,554,461
Military transition	152,362
Office expenses	292,797
Other financial expenses	273,477
Payroll taxes	200,287
Salaries and wages	2,298,691
Supplies	2,688,415
Utilities	3,877,166
Vehicle lease expense	247,445
Total operating expenses	21,541,959
Operating income	9,391,912
OTHER (INCOME) AND EXPENSES
Interest income—bond reserves	(562,126		)
Interest expense	12,279,518
Organization costs	42,500
Total other income and expenses	11,759,892
Net loss	$	(2,367,980	)

See notes to financial statements

183

Fort Carson Family Housing, LLC
STATEMENT OF CHANGES IN MEMBERS’ EQUITY (DEFICIT)
For the year ended December 31, 2006

	GMH Military				Department
	Housing—Fort				of the		GMH/Integrated,
	Carson, LLC				Army		LLC			Total
Members' equity (deficit)
December 31, 2005		$	6,598,148		$	26,581,729		$	—	$	33,179,877
Distributions		(2,575,938		)	—			—		(2,575,938		)
Net income		(2,367,980		)	—			—		(2,367,980		)
Members' equity (deficit)
December 31, 2006		$	1,654,230		$	26,581,729		$	—	$	28,235,959

See notes to financial statements

184

Fort Carson Family Housing, LLC
STATEMENT OF CASH FLOWS
For the year ended December 31, 2006

Reconciliation of net income to net cash provided by operating activities
Net loss	$	(2,367,980	)
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	7,363,193
Amortization	114,078
Bad debt	245,657
(Increase) decrease in assets
Tenant accounts receivable	(207,832		)
Other current assets	589
Increase (decrease) in liabilities
Accounts payable	1,893,237
Management fee payable	(106,166		)
Accrued expenses	(865,482		)
Accrued interest	411,103
Prepaid rent	111,088
Net cash provided by operating activities	6,591,485
Cash flows from investing activities
Deposits to bond reserves	(110,768,669		)
Investment in rental property	(4,910,192		)
Net cash used in investing activities	(115,678,861		)
Cash flows from financing activities
Bond proceeds	118,600,000
Principal payments on bonds	(2,205,000		)
Distributions to members	(2,575,938		)
Payment of loan costs	(3,593,851		)
Net cash used in financing activities	110,225,211
NET INCREASE IN CASH	1,137,835
Cash and cash equivalents, beginning	861,474
Cash and cash equivalents, ending	$	1,999,309
Supplemental disclosure of cash flow information
Cash paid during the year for interest, net of capitalized of $27,642	$	11,840,773
Supplemental schedule of noncash investing and financing activities
Construction in progress	$	(1,592,732	)
Development costs payable	1,592,732
	$	—

See notes to financial statements

185

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 2006

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fort Carson Family Housing, LLC, (the Company) was formed as a limited liability company on July 9, 1999, under the laws of the State of Colorado, for the purpose of leasing, constructing, rehabilitating, developing, and operating housing at a military base located in Colorado Springs, Colorado, known as Fort Carson (the Installation) under the terms of Contract Number DACA45-99-C-0066 (the Contract) awarded by the United States Department of the Army (Army).

The construction sites are located on the northwest corner of Fort Carson. Approximately 467.18 acres are currently developed and 309.69 acres are undeveloped. All sites are located on land owned by the Army and leased to the Company pursuant to terms of a 50 year ground lease. The original site development plan for the Installation requires construction of 841 new housing units within four years from the date of the contract award and renovation of the existing 1,823 units within five years from the date of the Contract award. As of December 31, 2006, all 841 new housing units and all 1,823 renovation units were completed. During 2006, the Company began construction to build additional new homes. The site development plan for the Installation includes the demolition of approximately 8 units on the project site and the construction of 404 new housing units within three years from the date of the Contract award.

The Company was reorganized on December 21, 2005, under the laws of the State of Delaware. The original operating agreement was terminated and all members entered into a new operating agreement effective December 21, 2005. The members consist of GMH Military Housing - Fort Carson, LLC, who will serve as the managing member (Managing Member) and the United States of America, acting by and through the Department of the Army (Government Member).

On November 29, 2006 the operating agreement was amended to admit a third member, GMH Army/Integrated, LLC (Integrated Member). The Members have acknowledged and agreed that the Integrated Member has not made and was not required to make a capital contribution to the Company as of November 29, 2006.

Prior to the effective date of the Second Amended and Restated Operating Agreement, which is effective November 29, 2006, available cash, as defined, shall be distributed as follows:

(a)To repay any member loans;

(b)To the Managing Member to the extent of any unpaid amortization amount, as defined;

(c)To the Managing Member to fully amortize the unreturned contribution amount at a rate of 10 percent per year from July 1, 2005, to June 30, 2015, which should be paid monthly in accordance with the amortization schedule. In any given month, if the amortization amount is not paid in full, the unpaid portion will accrue interest at the rate of 10 percent per annum;

(d)Until June 30, 2015, 30 percent of the balance, if any, shall be distributed to the managing member and the remainder shall be deposited into the Reinvestment Account and, after June 30, 2015, 10 percent of the balance, if any, shall be distributed to the Managing Member and the remainder shall be deposited into the Reinvestment Account;

(i)Each year from 2005 to 2015, the Company shall recalculate the Internal Rate of Return (IRR) on the Managing Member’s initial capital contribution.

186

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(ii)Each year from 2005 to 2015, if the IRR for a given year does not exceed 18 percent, the annual percentage distribution to be made to the Managing Member will not be capped or otherwise limited;

(iii)Each year from 2005 to 2015, if the IRR for a given year exceeds 18 percent, the distribution of the annual percentage distribution for such fiscal year will be determined as follows:

(a)if the amount of the distribution necessary to meet the 18 percent ceiling is less than $1.745 million, the Managing Member will receive the full 30 percent annual percentage distribution of $1.745 million, whichever is less;

(b)if the amount of the distribution necessary to meet the 18 percent ceiling is more than $1.745 million, the annual percentage distribution to be made to the Managing Member shall be capped or otherwise limited to that amount that does not result in an IRR computation exceeding 18 percent;

(iv)For year 2016,  and for each year thereafter, the annual percentage distribution will be limited to $1.745 million only if an 18 percent IRR is received;

(v)The disallowed portion of the annual percentage distribution for any fiscal year that would otherwise be payable to the Managing Member, but for the cap or limit as provided above, shall be deposited into the Reinvestment Account.

(e)   The balance of the Reinvestment Account shall be distributed to the Government Member upon any event of dissolution after payment of the above distributions.

During the year ended December 31, 2006, $2,575,938 was distributed to the Managing Member in accordance with the operating agreement that terminated on November 29, 2006. In addition, $502,167 was paid to the Managing Member as additional preferred return and is included in interest expense on the accompanying statement of operations.

Pursuant to the new operating agreement, available cash, as defined, shall be distributed as follows:

(a)To repay any member loans;

(b)To the Managing Member to the extent of any unpaid amortization amount, as amended;

(c)To the Managing Member to fully amortize the unreturned contribution amount at a rate of 10 percent per year from July 1, 2005, to June 30, 2015, which should be paid monthly in accordance with the amortization schedule. In any given month, if the amortization amount is not paid in full, the unpaid portion will accrue interest at the rate of 10 percent per annum;

(d)An amount equal to the annual percentage distribution shall be distributed to the Managing Member and the remainder, if any, shall be deposited into the Reinvestment Account;

(i)    Until December 31, 2011, the annual percentage distribution shall be equal to 50 percent of available cash, if any, after making the distributions provided for above; provided, however, in no event shall the annual percentage distribution in any particular year exceed amounts as noted in the operating agreement;

187

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(ii)After December 31, 2011 until June 30, 2015, the annual percentage distribution shall be equal to 30 percent of available cash, if any, after taking the distributions noted previously; provided, however, in no event shall the annual percentage distribution in any particular year exceeds the greater of an IRR of 18 percent or $1,745,000;

(iii)After June 30, 2015 and until December 31, 2024, the annual percentage distribution shall be equal to 15 percent of available cash, if any, after making the distributions noted previously; provided however, in no event shall the annual percentage distribution in any particular year exceeds the greater of an IRR of 18 percent or annual amounts as noted in the operating agreement;

(iv)For 2025 and for each year thereafter, the annual percentage distribution shall be equal to 10 percent of available cash, if any, up to a maximum of $1,745,000 after making distributions above.

(e)Upon dissolution of the Company, the balance of the Reinvestment Account shall be distributed to the Government Member after:

(i)Payment of the debts and liabilities of the Company, in the order of priority provided by law (excluding any member loans), and payment of the expenses of liquidation; and then

(ii)Payment of any and all member loans made by members or their affiliates to the Company, plus any accrued but unpaid interest thereon, which amount shall be applied first to interest and then to principal; provided, that in the event the Company’s funds are insufficient to satisfy all such loans, then all member loans made by all members or their affiliates shall be repaid on a pro-rata basis; and then,

(iii)Setting up of such reserves as the Manager or liquidating trustee deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company or any obligation or liability not then due and payable; provided, any balance of such reserve, at the expiration of such period as the members or liquidating trustee shall deem advisable, shall be distributed in the manner herein provided; and then,

(iv)Distribution to the Managing Member of the unpaid amortization amount, if any; and then,

(v)Distribution to the Managing Member in an amount not to exceed the then outstanding amortization amount balance as set forth in the amortization schedule; and then,

(vi)Distribution to the members (or in the case of the Government Member, at the Government Member’s election, to the Integrated Member) in accordance with the positive balances in their capital accounts.

(f)The balance of the Reinvestment Account shall be distributed to the Government Member upon any event of dissolution after payment of the above distributions.

188

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

No distributions were made under the terms of the new operating agreement during the year ended December 31, 2006.

Each year from 2006 through 2015, for purposes of computing the cap on the annual percentage distributions, the Company shall recalculate the IRR on the Managing Member’s Initial Capital Contribution. This calculation will include all cash distributions received by the Managing Member from the Company since the year 2000, such as distributions of the amortization amount, distributions from available cash and any special distributions, but shall specifically exclude the fees paid to various third parties affiliated with the Managing Member pursuant to contracts, including the Management Agreement, the Renovation Agreement and the Development Agreement, and any amounts paid for asset management services.

Net profits are allocated consistently in both agreements, and are allocated as follows:

(a)to the Managing Member only to the extent the Managing Member actually receives cash distributions of available cash pursuant to the above;

(b)any remaining net profits to the Government Member.

Net losses are allocated consistently in both agreements, and are allocated as follows:

(a)to the Managing Member in an amount necessary to reduce the Managing Member’s positive capital account balance to zero

(b)any remaining net losses to the Government Member.

A summary of significant accounting policies follows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Accounts Receivable and Bad Debts

Tenant receivables are reported net of an allowance for doubtful accounts. Management’s estimate of the allowance is based on historical collection experience and a review of the current status of tenant accounts receivable. It is reasonably possible that management’s estimate of the allowance will change.

Intangible Assets and Amortization

Loan costs are amortized over the term of the mortgage loan using the straight-line method, which approximates the effective interest method. Estimated amortization expense for each of the five ensuing years is $223,891 annually.

Rental Property

All construction and soft costs associated with development are capitalized as construction in progress and are carried at cost. Leasehold improvements are removed from construction in progress and are capitalized as housing units are placed in service based on completion of construction. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided for in amounts

189

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

sufficient to relate the cost of depreciable assets to operations over the lesser of the term of the ground lease or their estimated service lives by use of the straight-line method for financial reporting purposes.

The estimated lives used in determining depreciation are:

Leasehold improvements	40 years
Land improvements	15 years
Furniture and fixtures	5 years

Cash Equivalents

The Company considers all highly liquid investments, including money market accounts with an original maturity date of three months or less when purchased to be cash equivalents.

Rental Income

Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Company and tenants of the property are operating leases. The Company receives rental payments from the United States Department of Defense on behalf of the tenants in the form of a Basic Allowance for Housing (BAH). Tenants authorized to occupy the Installation are limited to military personnel, except under limited circumstances.

Income Taxes

No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the members individually.

Advertising Costs

Advertising costs are expensed as incurred.

Capitalization of Interest, Insurance, and Real Estate Taxes

During development of the Installation, the Company will capitalize interest costs incurred that relate to development. For the year ended December 31, 2006, the Company capitalized $27,642 of interest costs.

During the year ended December 31, 2006, the Company did not capitalize any insurance costs.

During the year ended December 31, 2006, the Company was exempt from real estate taxes, thus no amounts have been capitalized.

Fair Value of Financial Instruments

The carrying value of accounts receivable, accounts payable and accrued expenses, and other assets and liabilities are reasonable estimates of fair values because of their relatively short-term nature.

The fair value of the notes payable were estimated using discounted cash flow analysis, based on the Company’s estimated incremental borrowing rate at December 31, 2006. The fair value of  the notes exceed the carrying value by approximately $14,949,165 at December 31, 2006.

190

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 1—ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment of Long-Lived Assets

The Company has implemented Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires the Company under certain circumstances to review long-lived assets and certain intangibles to determine if the carrying value exceeds the undiscounted cash flows expected to be derived from the asset. If the carrying value exceeds the cash flows, then recorded amounts of the assets will be reduced to their fair value. No impairment losses have been recognized during the year ended December 31, 2006.

NOTE 2—MORTGAGE PAYABLE

The Company entered into a loan agreement with Bank One, Colorado, N.A. (Bank One) on November 15, 1999, in the amount of $147,035,000. The mortgage was funded on November 15, 1999 with proceeds from the issuance of $147,035,000 of taxable bonds, Fort Carson Family Housing, LLC Taxable Fort Carson Housing Revenue Bonds, Series 1999 (the 1999 Bonds). Proceeds were specifically for funding development of the Installation and were placed in a restricted trust account with Bank One (the Trustee).

The mortgage bears interest at the rate of 7.78 percent. Interest only payments were required through August 15, 2004 (the date construction of the Installation was estimated to be completed). Monthly installments of principal and interest shall be payable on the first day of each month beginning on September 15, 2004, until maturity on November 15, 2029.

The loan is non-recourse and is secured by a first lien mortgage and security interest in the Installation and is also secured by a guaranteed loan. MBIA Insurance Corporation (MBIA) has provided a guarantee under a Financial Guaranty Insurance Policy dated February 12, 2001 between Bank One and MBIA. Under the terms of the Guaranty, MBIA guarantees to the full and complete payment of principal and interest as such payments become due. Furthermore, the United States of America (USA) has provided a guarantee under a Military Housing Loan Guaranty Agreement (Guaranty) dated November 15, 1999, between Bank One and the USA. Under the terms of the Guaranty, the USA will provide certain payments in the event of a payment default under the loan which is securing the Bonds that is directly caused by an Installation closure, downsizing of at least 40 percent of Installation personnel, or deployment of at least 40 percent of Installation personnel.

On November 1, 2006, the Company amended its Trust Indenture and Security Agreement with The Bank of New York (the Trustee). In addition to the financing secured by the original Indenture, the Company obtained additional financing in the amount of $118,600,000. The mortgage was funded on November 29, 2006 with proceeds from the issuance of $118,600,000 of taxable bonds, Fort Carson Family Housing, LLC Taxable Fort Carson Housing Revenue Bonds, Series 2006 (the 2006 Bonds). Proceeds were specifically for funding new development of the Installation and were placed in a restricted trust account with The Bank of New York. The loan is secured by the property as defined in the Trust Indenture and Security Agreement.

191

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 2—MORTGAGE PAYABLE (Continued)

The mortgage note bears interest at the rate of 5.65 percent. Interest only payments are required through December 15, 2009. Monthly installments of principal and interest shall be payable on the first day of each month beginning on January 15, 2010, until maturity on September 15, 2044.

Principal payments required on the mortgages for each of the following five years are as follows:

	Series 1999		Series 2006		Total
December 21, 2007	$	2,385,000	$	—	$	2,385,000
2007	2,680,000		—		2,680,000
2008	2,770,000		—		2,770,000
2009	2,985,000		—		2,985,000
2010	3,215,000		1,119,341		4,334,341
Thereafter	128,095,000		117,480,659		245,575,659
	$	142,130,000	$	118,600,000	$	260,730,000

NOTE 3—RESERVES HELD BY TRUSTEE

In connection with the mortgage, the Company was required to deposit the proceeds with the Trustee. Amounts in these funds are restricted as to use. As of December 31, 2006, the Trustee has invested the money, with the exception of the construction account, interest reserve fund, and amenity fund, in short-term U.S. Treasury obligations. The Company has entered into a guaranteed investment contract with Societe Generale for a guaranteed rate of return of 6.25 percent per annum with respect to the interest reserve fund and the amenity fund. The Company has entered into a guaranteed investment contract with MBIA for a guaranteed rate of return of 4.933 percent per annum with respect to the construction account. Such funds are considered available for sale and are accounted for at their fair value, which approximates their cost at December 31, 2006.

The balances in these funds at December 31, 2006, are as follows:

Bond proceeds fund	$	192,896
Construction fund	108,089,569
Amenity fund	703,353
Backlog repairs and maintenace fund	9,010
Interest reserve fund	18,821
Repair and replacement reserve	185,838
Tax and insurance escrow	263,282
Revenue fund	147,097
Reinvestment fund	2,286,488
Senior bond principal fund	10,000
Operating expense fund	108,330
Utility Fund	6,798,042
Debt reserve fund	200,000
Demolition fund	807,912
Air conditioning fund	1,723,176
	$	121,543,814

192

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 3—RESERVES HELD BY TRUSTEE (Continued)

Each fund is utilized specifically for purposes related to the operation of the Installation as defined in the trust indenture.

NOTE 4—RELATED PARTY TRANSACTIONS

Development Services Fee

The Company entered into a development agreement on December 21, 2005, with GMH Military Housing Development, LLC, an affiliate of the Managing Member. The agreement provides for a monthly development fee in the amount of 3 percent of total development costs relating to development and construction of the Installation. The developer will also be entitled to a development incentive fee not to exceed 1 percent of development costs. As of December 31, 2006, $282,621 of the base development fee has been incurred and remains payable and is included as a component of development costs payable on the accompanying balance sheet. As of December 31, 2006, $94,207 of the incentive development fee has been incurred and remains payable and is included as a component of development costs payable on the accompanying balance sheet.

Management and Asset Management Fees

The Company entered into a management agreement on December 21, 2005, with GMH Military Housing Management, LLC, an affiliate of the Managing Member, to provide day-to-day oversight of the operations of the leasing and maintenance of the Installation. The agreement provides for a management fee of 3 percent and an asset management fee of 1 percent of monthly rental collections. For the year ended December 31, 2006, $1,212,012 of management fees and asset management fees were incurred and $281,764 is payable and is included as a component of accrued management fees on the accompanying balance sheet.

General and Administrative Expense Fee

In accordance with the management agreement, GMH is also entitled to a monthly general and administrative expense fee. The agreement provides for a general and administrative expense fee of an agreed-upon percentage of no less than 5.5 percent of all general and administrative expenses set forth in the budget. For the year ended December 31, 2006, $342,449 of general and administrative expense fee was incurred and $99,284 is included as a component of accrued management fees on the accompanying balance sheet.

Municipal Services Agreement

The Company entered into a municipal services agreement on December 21, 2005, with the United States of America (USA), an affiliate of the Government Member. In accordance with the agreement, the USA agrees provide the Installation with services such as utilities, fire protection, police patrol, and emergency services. As of December 31, 2006, the Company has incurred $3,593,524 of municipal services fees which are included as a component of utilities expense on the accompanying statement of operations. As of December 31, 2006, $911,473 remains payable and is included as a component of accounts payable on the accompanying balance sheet.

193

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 4—RELATED PARTY TRANSACTIONS (Continued)

Payment for Municipal Services

Pursuant to the Second Amended and Restated Operating Agreement, the Government Member shall be responsible for provided utility service and fire, EMT and police service to the Project.  The Company shall use funds held in the Reinvestment Account to pay utility costs and emergency services costs.  Funds in the Reinvestment Account shall be applied in the following order of priority:

(a)   to pay emergency services costs,

(b)   to pay utility costs for housing units constructed as part of the 2006 project,

(c)   to pay utility costs for housing units constructed as part of the 1999 project, and

(d)   for other purposes permitted.

The Company shall establish a utility reserve fund outside of the Reinvestment Account (the “Utility Reserve Fund”) which shall be funded with proceeds of the bonds in the amount of $6,282,358.  To the extend funds in the Reinvestment Account are insufficient to pay utility costs, the Company shall pay utility costs from the Utility Reserve Fund.  Funds on deposit in the Utility Reserve Fund shall not be under the control of the Trustee or subject to the Trustee’s lien or encumbrance as security for the bonds or any loan to the Company, shall be invested in permitted investments, shall not be commingled with any other funds of the Company and shall not be pledged or voluntarily subjected to any lien or encumbrance.  Interest and investment earnings on amounts in the Utility Reserve Fund shall be credited to the Utility Reserve Fund.

In the event that sufficient funds are not available in the Reinvestment Account to pay emergency services costs, or in the Reinvestment Account or Utility Reserve Fund to pay utility costs related to housing units constructed as part of the 1999 project, payment for such expenses shall be carried as a payable from the Reinvestment Account and shall be paid out of the Reinvestment Account to the Government Member, as soon as sufficient funds become available.

Due to Affiliate

As part of its management activities, GMH Military Housing Management Fort Carson, LLC, an affiliate of the Managing Member, pays operating and maintenance expenses on behalf of the Installation and is then reimbursed. Amounts due to affiliates are non-interest bearing and are due upon demand. As of December 31, 2006, $88,641 is due to the affiliate and is included in accounts payable on the accompanying balance sheet.

NOTE 5—GROUND LEASE AGREEMENT

On November 18, 1999, the Company entered into a Ground Lease agreement with the Secretary of the Army (Secretary), an affiliate of the Trust. The consideration of the lease is the operation and maintenance of the Installation for 50 years. The lease can be extended at the option of the Secretary beyond the initial 50-year term of the contract. In addition, if the Company and its related construction affiliates are removed from the renovation and construction of the Installation for violation of terms and conditions of the contract, the Secretary can terminate the Ground Lease. Because the Army is a member

194

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 5—GROUND LEASE AGREEMENT (Continued)

of the Company, those assets transferred under the lease have been contributed to the Company under accounting principles generally accepted in the United States and have been recorded at the historical cost to the Army. Based on the age and estimated initial useful life of the existing structures, the historical cost to the Army was determined to be zero. The leasehold improvements incurred under the construction and renovation contracts are being depreciated over the lesser of their useful lives or the lease term.

On December 21, 2005, the original Ground Lease with the Secretary was amended and restated. The consideration of the lease is the operation and maintenance of the Installation for 50 years with an option by the Army to extend for an additional 25 years.

On November 29, 2006, the Ground Lease was amended by the Secretary to grant and convey by quitclaim deed to the Company additional land parcels, including all buildings, improvements, and fixtures of whatever nature currently located thereon. The additional parcels were added to the lease to encompass the new construction and rehabilitation phase of construction being funded by the new bonds. The payment terms of the lease remain unchanged. Existing structures on the new parcels are expected to be demolished as new construction progresses. No amount has been recorded in connection with the lease amendment. Cost of the existing structures located on the new parcels is estimated to be zero based on the Army’s historical net book value and the existing age of the structures. These structures are to be demolished and new structures to be constructed pursuant to plans described in Note 1.

NOTE 6—REINVESTMENT ACCOUNT

The generating agreement that terminated on November 26, 2006 required that a reinvestment account be established upon completion of the initial construction and renovation work. Funds available to be deposited in the reinvestment account are equal to the net operating income less the payment of debt service, any shortfall loans, management fees, and any preferred return on equity. Such deposits shall be kept in the trust solely for the use and benefit of meeting the costs and long-term capital expenses of the Installation. In the event that the operating agreement is terminated by the Trust, the remaining funds shall be first disbursed to and for the sole use and benefit of the Managing Member, in addition to all other amounts due the Managing Member under any provision of the agreement. In the event there are funds remaining at the expiration of the agreement, such funds will be disbursed to the Government Member.

Pursuant to the Second Amended and Restated Operating Agreement, the Company shall establish and maintain a separate, interest-bearing account known as the reinvestment account at a national bank or other financial institution.  Funds on deposit in the reinvestment account shall not be under the control of the Trustee or subject to the Trustee’s lien or encumbrance as security for the bonds or any loan to the Company, shall be invested in permitted investments, shall not be commingled with any other funds of the Company and shall not be pledged or voluntarily subjected to any lien or encumbrance.  Interest and investment earnings on amounts in the reinvestment account shall be credited to the reinvestment account.  The Company shall hold in the reinvestment account such amounts as were held in the reinvestment account established pursuant to the trust, which amounts were previously contributed by the trust pursuant to the available cash distributions as set forth in Note 1.  Expenditure of funds in, and disbursement of funds from, the reinvestment account shall require the consent of the Government Member and the Managing Member.  Notwithstanding the foregoing, funds in the reinvestment account may be withdrawn from the reinvestment account by the Manager, without further action by the members, to pay for utility

195

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 6—REINVESTMENT ACCOUNT (Continued)

costs and emergency services costs, to pay for demolition, construction, maintenance and renovation of the family housing and associated ancillary facilities at the installation if such expenditures are provided for in the annual budget or any out-year development plan, for emergency purposes not in excess of $50,000, and for expenditures that in the aggregate do not exceed $200,000 in a fiscal year.  In addition, upon the unanimous vote or consent of the Government Member and Managing Member, the Company may withdraw amounts from the reinvestment account and apply such funds to the benefit of any military housing development in which both Government Member and Managing Member or an affiliate of Managing Member holds an ownership interest.

As of December 31, 2006, $2,286,488 was held on deposit in the reinvestment account.

NOTE 7—COMMITMENTS AND CONTINGENCIES

Construction Contract

The Company entered into a cost plus a fee with a guaranteed maximum price construction contract on November 29, 2006, with Centex Construction, LLC (Centex), in an amount not to exceed $101,000,011, which is subject to additions and deductions by change orders, for the construction of approximately 404 new military housing units. As of December 31, 2006, $3,983,547 of the contract has been incurred and $960,541 remains payable and is included as a component of development costs payable on the accompanying balance sheet.

Concentration of Credit Risk

The primary source of revenue of the Installation will be rent collected from the tenants through the BAH. The BAH is adjusted and approved annually by the government and is based on civilian rental costs by pay grade, dependency status, and location. The Company is subject to payment of the BAH through appropriations made annually by the Army.  If such appropriations were removed or delayed or significantly reduced, the Company and its operations would be impaired.

The Company’s cash accounts are maintained in a chartered banking institution and are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company has not experienced any losses associated with deposits in excess of the maximum insurable limits.

Military Housing Loan Guaranty

As discussed in Note 2, the USA previously provided payments of the mortgage payable in the event of a payment default caused by an Installation closure, downsizing of at least 40 percent of Installation personnel, or deployment of at least 40 percent of Installation personnel.

On November 29, 2006, the loan guaranty agreement was amended to remove the guaranty of the mortgage obligations with respect to the 2006 bonds.

NOTE 8—INVOLUNTARY CONVERSIONS

During 2006, the Company received $1,080,327 of insurance proceeds related to various damage to housing units caused by wind in 2004 and 2005. Repairs were made to the damaged units. The Company has plans to make additional repairs in the amount of $654,532, which is included as a component of accrued liabilities on the accompanying balance sheet.

196

Fort Carson Family Housing, LLC
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2006

NOTE 9—OPERATING LEASE OBLIGATIONS

The Company has entered into several operating leases during 2006 related to vehicles under which it is a lessee. Rental expense related to these leases for the year ended December 31, 2006, was $150,279, which is included as a component of vehicle lease expense on the accompanying statement of operations. The following is a schedule of future minimum lease payments as of December 31, 2006, that have initial or remaining lease terms in excess of one year:

December 31, 2007	$	132,408
2008	132,408
2009	132,408
2010	132,408
2011	132,408
	$	662,040

NOTE 10—DEPLOYMENT OF TROOPS

During the year ended December 31, 2006, a military unit of approximately 5,000 soldiers was deployed. During times of deployment, family members often do not stay on base, but instead return home to be near other family members. As a result, the Installation experienced a significant increase in the number of vacant units with occupancy falling from 92% to 86% during the year.

197

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 16, 2007	GMH COMMUNITIES TRUST
	/s/ GARY. M. HOLLOWAY
	Gary M. Holloway, Sr.
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

	Signature		Title		Date
/s/ GARY M. HOLLOWAY		President, Chief Executive Officer		March 16, 2007
Gary M. Holloway, Sr.		and Chairman of our Board of Trustees (Principal Executive Officer)
/s/ BRUCE F. ROBINSON		President of Military Housing		March 16, 2007
Bruce F. Robinson		Business and Trustee
/s/ J. PATRICK O’GRADY		Executive Vice President and		March 16, 2007
J. Patrick O’Grady		Chief Financial Officer (Principal Financial Officer)
/s/ FREDERICK F. BUCHHOLZ		Trustee		March 16, 2007
Frederick F. Buchholz
/s/ RADM JAMES W. EASTWOOD (Ret)		Trustee		March 16, 2007
RADM James W. Eastwood (Ret)
/s/ MICHAEL D. FASCITELLI		Trustee		March 16, 2007
Michael D. Fascitelli
/s/ STEVEN J. KESSLER		Trustee		March 16, 2007
Steven J. Kessler
/s/ DENNIS J. O’LEARY		Trustee		March 16, 2007
Dennis J. O’Leary
/s/ DENIS J. NAYDEN		Trustee		March 16, 2007
Denis J. Nayden
/s/ RICHARD A. SILFEN		Trustee		March 16, 2007
Richard A. Silfen

198

EX-10.31

Exhibit 10.31

LOAN AGREEMENT

Dated as of October 2, 2006

Between

GMH COMMUNITIES, LP, as Borrower

and

WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS; PRINCIPLES OF CONSTRUCTION	1
Section 1.1	Definitions	1
Section 1.2	Principles of Construction	19
ARTICLE II	GENERAL TERMS	20
Section 2.1	Loan Commitment; Disbursement to Borrower	20
Section 2.2	Interest; Extension Options; Loan Payments; Late Payment Charge	21
Section 2.3	Prepayments	28
Section 2.4	Prohibition on Sale of Individual Property(ies)	30
Section 2.5	Prohibition on Sale of Mezzanine Assets	31
Section 2.6	No Offsets	32
ARTICLE III	RESERVED	33
ARTICLE IV	REPRESENTATIONS AND WARRANTIES	33
Section 4.1	Borrower Representations	33
Section 4.2	Survival of Representations	44
ARTICLE V	BORROWER COVENANTS	45
Section 5.1	Affirmative Covenants	45
Section 5.2	Negative Covenants	57
Section 5.3	Financial and REIT Status Covenants	61
Section 5.4	Limitation on Indebtedness	62
ARTICLE VI	INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS	63
Section 6.1	Insurance	63
Section 6.2	Casualty	67
Section 6.3	Condemnation	67
Section 6.4	Restoration	68

i

ARTICLE VII	[RESERVED]	72
ARTICLE VIII	DEFAULTS	72
Section 8.1	Event of Default	72
Section 8.2	Remedies	76
Section 8.3	Remedies Cumulative; Waivers	77
ARTICLE IX	SPECIAL PROVISIONS	78
Section 9.1	Sale of Notes and Securitization	78
Section 9.2	Securitization Indemnification	80
Section 9.3	Servicer	80
Section 9.4	Recourse	80
Section 9.5	Waivers	80
Section 9.6	Intercreditor Agreements	82
Section 9.7	UCC Plus/Eagle 9 UCC Insurance Policies	82
ARTICLE X	MISCELLANEOUS	82
Section 10.1	Survival	82
Section 10.2	Lender’s Discretion	82
Section 10.3	Governing Law	83
Section 10.4	Modification, Waiver in Writing	83
Section 10.5	Delay Not a Waiver	84
Section 10.6	Notices	84
Section 10.7	Trial by Jury	85
Section 10.8	Headings	85
Section 10.9	Severability	85
Section 10.10	Preferences	85
Section 10.11	Waiver of Notice	85
Section 10.12	Remedies of Borrower	86
Section 10.13	Expenses; Indemnity	86
Section 10.14	Schedules and Exhibits Incorporated	87
Section 10.15	Offsets, Counterclaims and Defenses	87
Section 10.16	No Joint Venture or Partnership; No Third-party Beneficiaries	88
Section 10.17	Publicity	88
Section 10.18	Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets	88
Section 10.19	Waiver of Counterclaim	89
Section 10.20	Conflict; Construction of Documents; Reliance	89
Section 10.21	Brokers and Financial Advisors	90
Section 10.22	Prior Agreements	90
Section 10.23	Assignment; Participation	90
Section 10.24	Treatment of Certain Information; Confidentiality	91

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EXHIBIT A	-	FORM OF CERTIFICATE OF COMPLIANCE
EXHIBIT B	-	FORM OF NOTICE OF BORROWING
SCHEDULE A	-	Individual Properties and Allocated Values
SCHEDULE B	-	Mezzanine Asset Owners, Mezzanine Assets, Mezzanine Allocated Loan Amounts and Allocated Values
SCHEDULE C	-	Encumbered Properties
SCHEDULE D	-	O&M Programs
SCHEDULE E	-	Sources & Uses

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LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of October 2, 2006 (as amended, restated, replaced, supplemented or otherwise modified pursuant to a written agreement signed by the parties hereto from time to time, this Agreement”), between WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, having an office at 301 South College Street, Charlotte, North Carolina 28288 (“Lender”) and GMH COMMUNITIES, LP, a Delaware limited partnership, having an address at 10 Campus Boulevard, Newtown Square, Pennsylvania 19073 (“Borrower”).

W I T N E S S E T H:

WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and

WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined).

NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows:

ARTICLE I

DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1             Definitions.

For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:

“Acquiror” shall have the meaning set forth in Section 2.2.1(b)(i).

“Acquisition Transaction” shall have the meaning set forth in Section 2.2.1(b)(i).

“Additional Advance” shall have the meaning set forth in Section 2.1.5.

“Adjusted Management EBITDA” shall mean the sum of (i) EBITDA received from the management of Student Housing Projects owned by a Person other than Borrower or its subsidiary for the three (3)-month period ending on the last day of the fiscal quarter ending on the date of determination, and (ii) EBITDA received from management fees, development fees, construction and renovation fees, and returns in respect of Equity Interests in respect of operating

Military Housing Projects for the three (3)-month period ending on the last day of the fiscal quarter ending on the date of determination, all as calculated in accordance with GAAP.

“Adjusted Prime Rate” shall mean an interest rate per annum equal to the Prime Rate in effect from time to time plus the difference (expressed as the number of basis points) between (a) the Eurodollar Rate on the date LIBOR was last applicable to the Loan and (b) the Prime Rate on the date that LIBOR was last applicable to the Loan; provided, however, in no event shall such difference be a negative number.

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person.

“Allocated Loan Amount” shall mean, for an Individual Property, the amount set forth on Schedule A attached hereto.

“Allocated Value” shall mean, for an Individual Property, the amount set forth on Schedule A attached hereto.

“ALTA” shall mean American Land Title Association, or any successor thereto.

“Applicable Laws” shall mean all existing and future federal, state and local laws, orders, ordinances, governmental rules and regulations and court orders that are applicable to the applicable Individual Property, the situation or the Person, as the case may be.

“Applicable Interest Rate” shall mean for each Interest Period through and including the date on which the Debt is paid in full, an interest rate per annum equal to (I) the Eurodollar Rate or (II) the Adjusted Prime Rate if the Loan begins bearing interest at the Adjusted Prime Rate in accordance with the provisions of Section ‎2.2.3 hereof.

“Appraisal” shall mean an appraisal prepared in accordance with the requirements of FIRREA, prepared by an independent third-party appraiser holding an MAI designation, who is State licensed or State certified if required under the laws of the State where the applicable Individual Property is located, who meets the requirements of FIRREA and who is otherwise reasonably satisfactory to Lender.

“Assignment of Agreements” those certain first priority assignment of agreements to trusts, liens, and permits, as the same may be amended, restated, replaced, supplemented, or otherwise modified from time to time.

“Assignment of Management Agreement” shall mean, with respect to each Individual Property, that certain Conditional Assignment of Management Agreement dated the date hereof among Lender, Property Guarantor and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified pursuant to a written agreement signed by the parties thereto from time to time.

“Award” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of any Individual Property.

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“Bankruptcy Code” shall mean Title 11 U.S.C. § 101 et seq., and the regulations adopted and promulgated pursuant thereto (as the same may be amended from time to time).

“Basic Carrying Costs” shall mean, with respect to each Individual Property, the sum of the following costs associated with such Individual Property for the relevant Fiscal Year or payment period:  (i) Taxes, and (ii) Insurance Premiums.

“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together with its respective successors and assigns.

“Breakage Costs” shall have the meaning set forth in Section ‎2.2.3(d) hereof.

“Business Day” a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, except that, when used in connection with a Eurodollar Loan, such day shall also be a day on which dealing between banks are carried on in U.S. dollar deposits in London, England.

“Capital Event” shall mean, after the Closing Date, (i) the sale, exchange, transfer, assignment or other disposition of (a) an Encumbered Property by an Encumbered Property Subsidiary, or any portion thereof or direct or indirect interest therein, or (b) any Mezzanine Asset by a Mezzanine Subsidiary (or a direct or indirect subsidiary of same) or any portion thereof or direct or indirect interest therein, in each case including, but not limited to, master leases and ground leases for all or substantially all of an Individual Property, Mezzanine Asset or Encumbered Property, but excluding Leases for space in a Mezzanine Asset or Encumbered Property, (ii) any financing by the Borrower, any Material Subsidiary or any Encumbered Property Subsidiary (or a direct or indirect Affiliate or subsidiary of the same) secured by an Individual Property, Mezzanine Asset or Encumbered Property or any portion thereof or a direct or indirect interest therein, or any refinancing of any indebtedness of Borrower, any Material Subsidiary or any Encumbered Property Subsidiary (or a direct or indirect Affiliate or subsidiary of the same) secured by an Individual Property, Mezzanine Asset or Encumbered Property (collectively, a “Refinancing”), (iii) the condemnation or deed in lieu of condemnation of an Individual Property, Mezzanine Asset or Encumbered Property or any portion thereof, (iv) any casualty with respect to an Individual Property, Mezzanine Asset or Encumbered Property, or (v) any other similar transaction involving Borrower, any Material Subsidiary or any Encumbered Property Subsidiary or any Affiliate thereof which is, in accordance with GAAP, treated as a capital or financing transaction.

“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized under GAAP (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements).

“Capital Proceeds” shall mean the Net Profit received by the Borrower, Mezzanine Subsidiary, Mezzanine Asset Owner or Encumbered Property Subsidiary from a Capital Event, less the sum of (a) the principal and interest on any indebtedness of the Encumbered Property Subsidiary secured in whole or in part by the related Encumbered Property or a portion thereof which is then required to be and is paid, in whole or part, with such proceeds, and (b) without duplication, all reasonable and ordinary costs and expenses (including any

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defeasance and/or “make-whole” amounts) incurred in connection therewith which shall first be approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed.

“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Cash” shall mean coin or currency of the United States of America or immediately available federal funds, including such funds delivered by wire transfer.

“Cash Flow Collateral” shall mean the collateral pledged to Lender pursuant to the Security Agreement.

“Casualty” shall have the meaning set forth in ‎Section 6.2 hereof.

“Casualty Consultant” shall have the meaning set forth in ‎Section 6.4(b)(iii) hereof.

“Casualty Retainage” shall have the meaning set forth in ‎Section 6.4(b)(iv) hereof.

“Closing Date” shall mean the date of the funding of the Loan.

“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and all applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

“Collateral” shall mean the Properties, the Mezzanine Collateral, the Guaranty, the Personal Property, the Rents, the Cash Flow Collateral, and all other real or personal property of Borrower or any Guarantor that is at any time pledged, mortgaged or otherwise given as security to Lender for the payment of the Debt under the Security Instruments, this Agreement, the Note or any other Loan Document.

“Compliance Certificate” shall mean a certification signed by a Responsible Officer of Borrower in the form attached hereto as Exhibit A and approved by Lender in its sole discretion.

“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of any Individual Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting such Individual Property or any part thereof.

“Condemnation Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

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“Consolidated Interest Charges” shall mean, for any Person for any period, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of such Person in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of such Person with respect to such period under capital leases that is treated as interest in accordance with GAAP.

“Consolidated Tangible Net Worth” shall mean, as of any date of determination for the Borrower and its Subsidiaries on a consolidated basis (except that the minority Equity Interests in Borrower shall be included for purposes of this calculation), (a) Shareholders’ Equity of Borrower and its Subsidiaries on that date minus (b) the Intangible Assets of Borrower and its Subsidiaries on that date; plus (c) all accumulated depreciation and amortization determined in accordance with GAAP of the Borrower and its Subsidiaries on that date.

“Control” (and the correlative terms “controlled by” and “controlling”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of the business and affairs of the entity in question by reason of the ownership of beneficial interests, by contract or otherwise.

“Credit Agreement” shall have the meaning set forth in ‎Section 2.1.4 hereof.

“Creditors Rights Laws” shall mean with respect to any Person, any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to its debts or debtors.

“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Loan under the Note, this Agreement, the Security Instruments, the Guaranty or any other Loan Document.

“Default” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would constitute an Event of Default.

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate, or (b) four percent (4%) above the Applicable Interest Rate.

“Disclosure Document” shall have the meaning set forth in ‎Section 9.2(a) hereof.

“EBITDA” shall mean for any period, for any Person, an amount equal to the net income for such period plus (a) the following to the extent deducted in calculating such net income: (i) Consolidated Interest Charges for such period; (ii) the provision for federal, state, local and foreign income taxes payable by such Person for such period; (iii) depreciation and amortization expense for such period; and (iv) other non-recurring expenses of the Person reducing such net income which do not represent a cash item in such period or any future period minus (b) the following to the extent included in calculating such net income: (i) federal, state,

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local and foreign income tax credits of the Person for such period; and (ii) all non-cash items increasing net income for such period.

“Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or State-chartered depository institution or trust company or (b) a segregated trust account or accounts maintained with a federal or State-chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a State-chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and State authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Embargoed Person” shall have the meaning set forth in Section 4.1.27 hereof.

“Encumbered Property” or “Encumbered Properties” shall mean individually, a property listed on Schedule C attached hereto, and collectively, the properties listed on Schedule C attached hereto.

“Encumbered Property Allocated Value” shall mean, for each Encumbered Property, (a) if the Capital Event with respect to such Encumbered Property is a sale of such Encumbered Property, 100% of the value of such Encumbered Property determined at the time of the sale based on an MAI appraisal prepared by an independent third party appraiser and (b) if the Capital Event with respect to such Encumbered Property is a Refinancing of such Encumbered Property, the greater of (i) 80% of the value of such Encumbered Property determined at the time of the sale based on an MAI appraisal prepared by an independent third party appraiser or (ii) the loan-to-value ratio of the new loan being obtained to effectuate such Refinancing.

“Encumbered Property Subsidiary” shall mean each Subsidiary of Borrower that owns an Encumbered Property.

“Environmental Indemnity” shall mean that certain Environmental Indemnity Agreement executed by Borrower and Guarantor in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified pursuant to a written agreement signed by the parties thereto from time to time.

“Environmental Law” shall mean any federal, State and local laws, statutes, ordinances, rules, regulations, standards, policies and other government directives or requirements, as well as common law, that, at any time, apply to Borrower, Guarantor or any Individual Property, Mezzanine Asset or Encumbered Property and related to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act.

“Environmental Liens” shall have the meaning set forth in Section 5.1.18 hereof.

“Equity Interests” shall mean, with respect to any Person, all of the shares of capital stock of (or other ownership of profit interests in) such Person, all of the warrants, options

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or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

“Eurodollar Rate” shall mean, with respect to any Interest Period, an interest rate per annum equal to LIBOR plus the LIBOR Margin.

“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.

“Exchange Act” shall have the meaning set forth in Section 9.2 hereof.

“Exchange Act Filing” shall have the meaning set forth in ‎Section 9.2 hereof.

“Extended Maturity Date” shall have the meaning set forth in Section 2.2.1(b) hereof.

“Extension Option One” shall have the meaning set forth in Section 2.2.1(b) hereof.

“Extension Option One Maturity Date” shall have the meaning set forth in Section 2.2.1(b) hereof.

“Extension Option Two” shall have the meaning set forth in Section 2.2.1(b) hereof.

“Financing Lease”: shall mean any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.

“FIRREA” means the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as the same may be amended from time to time.

“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during the term of the Loan.

“Fitch” shall mean Fitch, Inc.

“Flood Insurance Act” shall have the meaning set forth in ‎Section 6.1(a)(vii) hereof.

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“Force Majeure” shall mean any delay due solely to acts of god, governmental restriction, stays, judgments, orders or decrees of any court or other Governmental Authority, enemy actions, civil commotion, domestic or foreign terrorist action, strike, work stoppage, shortage of labor or materials or any or other cause or causes beyond the reasonable control of Borrower, but lack of funds (in and of itself) shall not be deemed to constitute a cause beyond the reasonable control of Borrower.

“GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

“Governmental Authority” shall mean any court, board, agency, commission, office, central bank or other authority of any nature whatsoever for any governmental unit (federal, State, county, district, municipal, city, country or otherwise) or quasi-governmental unit whether now or hereafter in existence.

“Guarantor” shall mean, collectively, Property Guarantor, Trust and Material Subsidiary or such replacement Guarantor that assumes all the obligations of Guarantor under the Loan Documents in accordance with the terms hereof.

“Guaranty” shall mean, collectively, the Property Guaranty, Trust Guaranty, the Mezzanine Property Guaranty and the Material Subsidiary Guaranty, as each of the same may be amended, restated, replaced, supplemented or otherwise modified from time to time by written agreement signed by the parties thereto.

“Hazardous Materials” shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; toxic mold; any substance the presence of which on any Individual Property, Mezzanine Asset or Encumbered Property is prohibited by any federal, State or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant” or other words of similar import within the meaning of any Environmental Law.

“Improvements” shall have the meaning set forth in Article 1 of the related Security Instrument with respect to each Individual Property.

“Indebtedness”: shall mean of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases or Synthetic Leases, (d) all obligations of such Person in respect of letters of credit, acceptances or similar instruments issued or created for the account of such Person, (e) all liabilities secured by

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(or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof (other than ad valorem taxes not yet due), and (f) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (e) above.  The amount of any Indebtedness under clause (e) shall be equal to the lesser of (A) the stated amount of the relevant obligations and (B) the fair market value of the property subject to the relevant Lien.

“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(b) hereof.

“Indemnified Parties” shall mean Lender, any Affiliate of Lender who is or will have been involved in the origination of the Loan, any Person who is or will have been involved in the servicing of the Loan, any Person in whose name the encumbrance created by the Security Instruments or Pledge Agreement is or will have been recorded, Persons who may hold or acquire or will have held a full or partial interest in the Loan, the holders of any Securities, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, members, employees, agents, servants, representatives, contractors, subcontractors, Affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including but not limited to any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan or any Individual Property or Mezzanine Collateral, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Lender’s assets and business).

“Indemnified Taxes” shall mean any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority.

“Individual Property” shall mean each parcel of real property, the Improvements thereon and all Personal Property owned by Property Guarantor and encumbered by a Security Instrument, together with all rights pertaining to such Property and Improvements, as more particularly described in Article 1 of each Security Instrument and referred to therein as the “Property” and as listed on Schedule A attached hereto.

“Initial Advance” shall have the meaning set forth in Section 2.1.4 hereof.

“Initial Maturity Date” shall mean April 2, 2007.

“Initial Term” shall mean the period commencing on the date hereof and ending on the Initial Maturity Date.

“Insurance Premiums” shall have the meaning set forth in ‎Section 6.1(b) hereof.

“Insurance Proceeds” shall have the meaning set forth in ‎Section 6.4(b) hereof.

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“Intangible Assets” shall mean assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

“Interest Period” shall mean (a) initially, the period commencing on the date of this Agreement and ending one (1), two (2) or three (3) months thereafter, as selected by Borrower in its Rate Request given to Lender with respect thereto; and (b) thereafter, each period commencing on the last day of the then expiring Interest Period applicable to the Loan and ending one (1), two (2) or three (3) months thereafter, as selected by the Borrower in its Rate Request given to Lender; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period pertaining to the Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day; (ii) any Interest Period pertaining to the Loan that would otherwise extend beyond the then current Maturity Date shall end on the then current Maturity Date; and (iii) any Interest Period pertaining to the Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.

“Key Entity” and “Key Entities” individually or collectively, as the context may require, Borrower, each Property Guarantor, each Mezzanine Subsidiary, each Mezzanine Asset Owner and GMH Communities GP Trust.

“Leases” shall mean any lease, sublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in an Individual Property or Mezzanine Asset, and every modification, amendment or other agreement relating to such lease or other agreement entered into in connection with such lease or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto.

“Legal Requirements” shall mean, with respect to each Individual Property, all applicable federal, State, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting such Individual Property or any part thereof, or the zoning, construction, use, alteration, occupancy or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting such Individual Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to such Individual Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.

“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns.

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“LIBOR” shall mean the rate of interest per annum for the first day of the Interest Period (the “Reset Date”) for deposits in U.S. Dollars for a period equal to the number of months contained in the Interest Period which appears on Dow Jones Page 3750 (or such other display page on the Dow Jones System or otherwise as may replace said Page 3750) as of 11:00 a.m. (London time) on the day that is two (2) Business Days prior to that Reset Date for a period, and in an amount, comparable to such Interest Period and the principal balance of the Loan outstanding during such Interest Period; provided, however, that if such rate does not appear on Dow Jones Page 3750 (or such replacement page), LIBOR shall be the rate on interest per annum quoted by Lender at approximately 11:00 a.m. New York time two (2) Business Days prior to the beginning of such Interest Period for the offering to leading banks in the London interbank market of U.S. Dollar deposits in immediately available funds for delivery on the first day of such Interest Period for a period equal to such Interest Period and the principal balance of the Loan outstanding during such Interest Period.  Lender shall determine LIBOR for each Interest Period and the determination of LIBOR by Lender shall be binding upon Borrower absent manifest error.

“LIBOR Margin” shall mean (a) 2.00% per annum during the Initial Term and after the Initial Term through the Extended Maturity Date if the Initial Term is extended due to Borrower’s exercise of Extension Option One and (b) 4.50% per annum for the period from and after the Initial Term through the Extended Maturity Date if the Initial Term is extended due to Borrower’s exercise of Extension Option Two.

“Lien” shall mean, with respect to each Individual Property, any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, Property Guarantor, the related Individual Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances but excluding Permitted Encumbrances (but not excluding liens that may arise after the date hereof under or pursuant to such Permitted Encumbrances).

“Loan” shall mean the loan, in the maximum aggregate principal amount of Two Hundred Fifty Million and 00/100 Dollars ($250,000,000.00), made by Lender to Borrower pursuant to this Agreement and the other Loan Documents as the same may be amended or split pursuant to the terms hereof.

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Security Instruments, the Assignment of Agreements, the Environmental Indemnity, the Assignments of Management Agreement, the Guaranty, the Security Agreement, the Pledge Agreement and all other documents executed and/or delivered in connection with the Loan.

“Losses” shall mean any and all claims, suits, liabilities (including, without limitation, strict liabilities, but excluding consequential damages), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to reasonable attorneys’ fees and other costs of defense).

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“Management Agreement” shall mean, with respect to any Individual Property, the management agreement entered into by and between Property Guarantor and Manager, pursuant to which the Manager is to provide management and other services with respect to such Individual Property, or, if the context requires, the Replacement Management Agreement executed in accordance with the terms and provisions of this Agreement.

“Manager” shall mean College Park Management, LLC, a Florida limited liability company, or, if the context requires, a Qualified Manager who is managing the Properties or any Individual Property in accordance with the terms and provisions of this Agreement.

“Material Adverse Effect” shall mean any event or condition that has a material adverse effect on (a) the financial condition or business of Borrower or its ability to perform its obligations under the Loan Documents, (b) the financial condition or business of the Encumbered Property Subsidiaries as a whole or their ability to perform their obligations under their existing loan documents or other contractual obligations as a whole, (c) the use, occupancy, operation or value of (including the net operating income) the Encumbered Properties as a whole, (d) the validity or enforceability of any Loan Document, (e) the validity, enforceability or priority of Lender’s security interest in the Collateral.

“Material Subsidiary” shall mean a subsidiary of Borrower or the Trust that has a significant amount of assets or equity or is important to the operations of Borrower to the extent not legally or contractually prohibited to guaranty the loan, including, but not limited to each Mezzanine Subsidiary, College Park Investments LLC, College Park Management, LLC, College Park Management TRS, Inc., GMH Military Housing, LLC and GMH Military Housing Investments, LLC, GMH Communities TRS, Inc., GMH Communities GP Trust and GMH Communities Services, Inc.

“Material Subsidiary Guaranty” shall mean that certain payment and performance guaranty executed and delivered by Material Subsidiary to Lender in connection with the Loan.

“Maturity Date” shall mean the Initial Maturity Date, as such date may be extended pursuant to Section 2.2.1(b) hereof, or such other date on which the final payment of the principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.

“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or in the other Loan Documents, under the laws of such State or States whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.

“Mezzanine Allocated Loan Amount” shall mean, for the Mezzanine Collateral, the amount set forth on Schedule B attached hereto.

“Mezzanine Asset Owner” shall mean the single member limited liability company that owns a Mezzanine Asset and each of which is 100% owned by the related Mezzanine Subsidiary, as each Mezzanine Asset Owner is listed on Schedule B attached hereto.

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“Mezzanine Assets” shall mean the properties, listed on Schedule B hereto, each which is indirectly owned by a Mezzanine Subsidiary.

“Mezzanine Collateral” shall have the meaning set forth in Section 2.5(a).

“Mezzanine Collateral Release Price” shall mean, as to any applicable Individual Property, 100% of the Mezzanine Value for such Mezzanine Collateral.

“Mezzanine Property Guarantor” shall mean individually or collectively, as the context may require, Savoy Village Associates Intermediate, LLC, Croyden Avenue Associates Intermediate, LLC, Monks Road Associates Intermediate, LLC, South Carolina Associates Intermediate, LLC, Reno Associates Intermediate, LLC, Denton Associates Intermediate, LLC and Lankford Drive Associates Intermediate, LLC.

“Mezzanine Property Guaranty” shall mean, that certain payment and performance guaranty executed and delivered by the Mezzanine Property Guarantor to Lender in connection with the Loan.

“Mezzanine Subsidiary” or “Mezzanine Subsidiaries” shall mean individually or collectively, as the context may require, Clarizz Boulevard Associates Intermediate, LLC, Lakeside Associates Intermediate, LLC, Urbana Associates Intermediate, LLC, Red Mile Road Associates Intermediate, LLC, Burbank Drive Associates Intermediate III, LLC, Commons Drive Associates Intermediate, LLC, Abbott Road Associates Intermediate, LLC, Campus View Drive Associates Intermediate, LLC, Alexander Road Associates Intermediate, LLC, Brown Road Associates Intermediate, LLC, Keller Boulevard Associates Intermediate, LLC.

“Mezzanine Value” shall mean for the Mezzanine Collateral, the value for the Mezzanine Collateral as it relates to each Mezzanine Asset as set forth on Schedule B attached hereto.

“Military Housing Projects” shall mean privatized military housing projects in the United States owned and/or operated by Borrower or Subsidiary of Borrower, with an average remaining ground lease term for all Military Housing Projects, taken as a whole, being forty (40) years or greater, and “Military Housing Project” means any one of the Military Housing Projects.

“Monthly Debt Service Payment Amount” shall mean a monthly payment of interest only calculated in accordance with the terms hereof.

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Net Proceeds” shall have the meaning set forth in ‎Section 6.4(b) hereof.

“Net Proceeds Deficiency” shall have the meaning set forth in ‎Section 6.4(b)(vi) hereof.

“Net Profit” shall mean, in connection with any Capital Event, (a) if relating to a Casualty or Condemnation, Net Proceeds less the amount of Net Proceeds utilized and/or made available by Lender (or the applicable mortgage lender) to Borrower, Property Guarantor,

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Mezzanine Asset Owner or Encumbered Property Subsidiary to restore the applicable Individual Property, Mezzanine Asset or Encumbered Property, as the case may be, and (b) for all other Capital Events, an amount equal to the gross proceeds received by Borrower, Mezzanine Subsidiary or Encumbered Property Subsidiary or any Affiliate thereof in connection therewith, less all reasonable and customary costs and expenses incurred in connection therewith.

“Non-U.S. Entity” shall have the meaning set forth in Section 2.2.8 hereof.

“Note” shall mean that certain promissory note of even date herewith in the original principal amount of Two Hundred Fifty Million and 00/100 Dollars ($250,000,000.00), made by Borrower in favor of Lender, as the same may be amended, restated, replaced, extended, renewed, supplemented, severed, split, or otherwise modified pursuant to a written agreement signed by the parties thereto from time to time.

“Notice of Borrowing” shall mean a notice signed by a Responsible Officer of Borrower in the form attached hereto as Exhibit B.

“O&M Program” shall mean, with respect to each Individual Property, Mezzanine Asset or Encumbered Property listed on Schedule D hereof, if any, that certain operations and maintenance program developed by Borrower or Property Guarantor and approved by Lender, as the same may be amended, replaced, supplemented or otherwise modified from time to time pursuant to an agreement executed by the parties thereto from time to time.

“Obligations” shall mean Borrower’s obligation to pay the Debt and perform its obligations under the Note, this Agreement and the other Loan Documents.

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed on behalf of Borrower by a Responsible Officer.

“Other Charges” shall mean all maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining any Individual Property, now or hereafter levied or assessed or imposed against such Individual Property or any part thereof.

“Payment Date” shall mean the first (1st ) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day.

“Permitted Encumbrances” shall mean, with respect to an Individual Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters (i) disclosed in the Title Insurance Policy relating to such Individual Property or any part thereof or (ii) shown on the Survey, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet delinquent, (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s reasonable discretion, and (e) easements, restrictions, covenants, reservations and rights consented to by Lender pursuant to 5.2.10(f) hereof.

“Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, State, county or

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municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

“Personal Property” shall have the meaning set forth in Article 1 of the Security Instrument with respect to each Individual Property.

“Physical Conditions Report” shall mean, with respect to each Individual Property, a structural engineering report prepared by a company satisfactory to Lender regarding the physical condition of such Individual Property, satisfactory in form and substance to Lender in its sole discretion.

“Plan” shall mean an employee benefit plan (as defined in section 3(3) of ERISA) whether or not subject to ERISA or a plan or other arrangement within the meaning of section 4975 of the Code.

“Plan Assets” shall mean assets of a Plan within the meaning of section 29 C.F.R. section 2510.3-101 or similar law.

“Pledge Agreement” shall mean the Pledge Agreement dated the date hereof made by Borrower and each of the pledgors named therein, as the same may be amended, supplemented or otherwise modified from time to time.

“Policies” shall have the meaning set forth in ‎Section 6.1(b) hereof.

“Prepayment Date” shall have the meaning set forth in Section ‎2.3.1(a) hereof.

“Prime Rate” shall mean, on a particular date, a rate per annum equal to the rate of interest published in The Wall Street Journal as the “prime rate”, as in effect on such day, with any change in the prime rate resulting from a change in said prime rate to be effective as of the date of the relevant change in said prime rate; provided, however, that if more than one prime rate is published in The Wall Street Journal for a day, the average of the prime rates shall be used; provided, further, however, that the Prime Rate (or the average of the prime rates) will be rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%.  In the event that The Wall Street Journal should cease or temporarily interrupt publication, then the Prime Rate shall mean the daily average prime rate published in another business newspaper, or business section of a newspaper, of national standing chosen by Lender.  If The Wall Street Journal resumes publication, the substitute index will immediately be replaced by the prime rate published in The Wall Street Journal.  In the event that a prime rate is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall select a comparable interest rate index which is readily available to Borrower and verifiable by Borrower but is beyond the control of Lender, provided, however, that such comparable index is used by Lender for borrowers similarly situated to Borrower.  Lender shall give Borrower prompt written notice of its choice of a substitute index and when the change became effective.  Such substitute index will also be rounded to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%.  The determination of the Prime Rate by Lender shall be conclusive and binding absent manifest error.

“Prohibited Person” shall mean any Person:

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(a)           listed in the Annex to, or otherwise subject to the provisions of, the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”);

(b)           that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(c)           with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Executive Order;

(d)           who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order;

(e)           that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list; or

(f)            who is an Affiliate of or affiliated with a Person listed above.

“Properties” shall mean, collectively, each and every Individual Property which is subject to the terms of this Agreement.

“Property” shall mean, as the context may require, the Properties or an Individual Property.

“Property Guarantor” shall mean individually and collectively Savoy Village Associates, LLC, Croyden Avenue Associates, LLC, Monks Road Associates, LLC, South Carolina Associates, LLC, Reno Associates, LLC, Denton Associates, LLC and Lankford Drive Associates, LLC, the owners of the Properties.

“Property Guaranty” shall mean, that certain payment and performance guaranty, dated as of the date hereof, executed and delivered by Property Guarantor to Lender in connection with the Loan.

“Provided Information” shall have the meaning set forth in Section 9.1(a) hereof.

“Qualified Manager” shall mean a (A) reputable and experienced professional management organization (a) which manages student housing of quality and similar size to the Properties (exclusive of the Properties) and (b) prior to whose employment as manager of any Individual Property or Mezzanine Asset such employment shall have been approved by Lender, which approval shall not be unreasonably withheld or delayed and (c) such other management organization reasonably acceptable to Lender.  Notwithstanding the foregoing, any Manager replaced at the direction of the Lender pursuant to the terms hereof shall no longer be deemed a Qualified Manager.

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“Rating Agencies” shall mean each of S&P, Moody’s, and Fitch, and any other nationally-recognized statistical rating agency which has rated the Securities.

“Refinancing” shall have the meaning set forth in the definition of “Capital Event”.

“Related Party” shall mean any Guarantor and any of their respective Affiliates.

“Release” of any Hazardous Materials shall mean any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

“Release Price” shall mean, as to any applicable Individual Property, 100% of the Allocated Value for such Individual Property.

“Rents” shall have the meaning set forth in Article 1 of the Security Instrument with respect to each Individual Property.

“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, or (ii) a management agreement with a Qualified Manager, which management agreement shall be reasonably acceptable to Lender in form and substance; and (b) a conditional assignment of management agreement substantially in the form of the Assignment of Management Agreement (or such other form reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at Borrower’s expense.

“Responsible Officer” means with respect to a Person, any duly authorized officer, member, partner, shareholder or other equity owner of such Person.

“Restoration” shall mean the repair and restoration of an Individual Property after a Casualty or Condemnation as nearly as possible to the condition the Individual Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.

“Restricted Party” shall mean Borrower, Trust, each Material Subsidiary, each Property Guarantor, each Mezzanine Property Guarantor, each Mezzanine Asset Owner or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of, any of the foregoing, but excluding any limited partner in Borrower and the holder of any interest in the Trust.

“S&P” shall mean Standard & Poor’s Ratings Services, a division of McGraw-Hill, Inc.

“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, transfer or pledge of a direct or indirect legal or beneficial interest.

“Securities Act” shall have the meaning set forth in ‎Section 9.2(a) hereof.

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“Security Agreement” shall mean that certain Security Agreement dated as of the date hereof executed and delivered by College Park Management TRS, Inc., a Delaware corporation, GMH Military Housing, LLC, a Delaware limited liability company, GMH Communities TRS, Inc., a Delaware corporation, GMH Military Housing Investments LLC, a Delaware limited liability company, College Park Investments LLC, a Delaware limited liability company and College Park Management, LLC, a Florida limited liability company, collectively as pledgors, to and for the benefit of Lender, as secured party, and relating to the Cash Flow Collateral.

“Security Instrument” shall mean, with respect to each Individual Property, that certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt, as applicable) and Security Agreement, executed and delivered by Property Guarantor as security for the Guaranty and encumbering such Individual Property, as the same may be amended, restated, replaced, supplemented or otherwise modified pursuant to a written instrument signed by the parties thereto from time to time.

“Servicer” shall have the meaning set forth in Section 9.3 hereof.

“Servicing Agreement” shall have the meaning set forth in Section 9.3 hereof.

“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof.

“Shareholders’ Equity” shall mean as of any date of determination for any Person, consolidated shareholders’ equity of such Person as that date determined in accordance with GAAP.

“Special Purpose Entity” shall mean, (a) as to each Property Guarantor, an entity that satisfies the requirements of Section 3.6 of the related Security Instrument, (b) as to each Mezzanine Subsidiary, an entity that satisfies the requirements of Section 19 of the Pledge Agreement, (c) as to each Mezzanine Asset Owner and Mezzanine Property Guarantor, an entity that satisfies the requirements of Section 6.1 of the Loan Agreement to which such entity is a party to with Bank of America, N.A. on the date hereof and (d) as to each Encumbered Property Subsidiary, an entity that satisfies criteria similar to that which is set forth in Section 3.6 of each Security Instrument and which is included in each such Encumbered Property Subsidiary’s loan documents encumbering the related Encumbered Property.

“State” shall mean, with respect to an Individual Property, the State or Commonwealth in which such Individual Property or any part thereof is located.

“Student Housing Projects” shall mean real estate properties operated as student housing in the United States owned by Borrower or a Subsidiary of Borrower, and “Student Housing Project” means any one of the Student Housing Projects.

“Subsidiary” shall mean as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such

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corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Survey” shall mean, with respect to an Individual Property, a survey prepared by a surveyor licensed in the State where such Individual Property is located and reasonably satisfactory to Lender and the company or companies issuing the Title Insurance Policies, and containing a certification of such surveyor reasonably satisfactory to Lender.

“Synthetic Lease” shall mean as to any Person, the monetary obligation under any synthetic, off-balance sheet, tax retention or tax leveraged lease.

“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents or similar charges, now or hereafter levied or assessed or imposed against any Individual Property or part thereof.

“Tenant” shall mean any Person leasing, subleasing or otherwise occupying any portion of the Property under a Lease or other occupancy agreement with Borrower.

“Title Insurance Policy” shall mean, with respect to each Individual Property, an ALTA mortgagee title insurance policy in a form reasonably acceptable to Lender (or, if an Individual Property is located in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to such Individual Property and insuring the lien of the Security Instrument encumbering such Individual Property.

“Transfer” shall have the meaning set forth in Section 5.2.10(a) hereof.

“Trust” shall mean GMH Communities Trust, a Maryland real estate investment trust.

“Trust Guaranty” shall mean that certain payment and performance guaranty executed and delivered by Trust to Lender in connection with the Loan.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State in which an Individual Property is located.

Section 1.2             Principles of Construction.

All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified.  All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise.  Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

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ARTICLE II

GENERAL TERMS

Section 2.1             Loan Commitment; Disbursement to Borrower.

2.1.1          Agreement to Lend and Borrow.

Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Initial Advance on the Closing Date.

2.1.2          Revolving Loan.

Subject to the terms and conditions set forth herein, the Lender agrees to make the Loan available to the Borrower in the aggregate principal amount of up to Two Hundred Fifty Million Dollars ($250,000,000).  The Borrower may borrow such amounts in cash, at any time or from time to time in accordance with the terms of this Agreement, but only until the earliest to occur of (a) ten (10) days before the Maturity Date or (b) such earlier date that the Loan may be accelerated as provided in Section 8.2 hereof. Amounts repaid may be reborrowed upon satisfaction of the requirements of Section 2.1.5 hereof.

2.1.3          The Note, Security Instruments and Loan Documents.

The Loan shall be evidenced by the Note and secured by the Pledge Agreement, the Guaranty and the other Loan Documents.

2.1.4          Use of Proceeds.

The proceeds of an initial advance of $                  (“Initial Advance”) will be used by Borrower as follows: (i) to repay any existing indebtedness of Borrower including, without limitation the Credit Agreement dated November 8, 2004 as amended (the “Credit Agreement”) and all costs and expenses necessary to repay all obligations under the Credit Agreement in full, (ii) to acquire, or cause two of the Mezzanine Asset Owners to acquire the Mezzanine Assets being acquired on the date hereof and (iii) to pay costs and expenses incurred in connection with the closing of the Loan. Borrower shall deliver a Notice of Borrowing to Lender in connection with the Initial Advance.

2.1.5          Additional Advances.

Subsequent to the date of this Agreement and during the term of the Loan, Borrower may request one or more additional advances for the payment of (a) general working capital costs of the Borrower pursuant to the Sources and Uses Statement attached as Schedule E or otherwise approved by Lender in its sole discretion, (b) 4th quarter dividends for 2006 in an aggregate amount not to exceed $17,500,000.00 and (c) to pay 3rd quarter dividends for 2006 in an aggregate amount not to exceed $17,500,000.00, in each case as approved by Lender in its sole and absolute discretion (each such advance, an “Additional Advance”).  Such Additional Advances may be requested by Borrower and shall be made, upon three (3) Business Days’ notice provided that Borrower has satisfied the following conditions: (i) no Event of Default or

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Default exists as of the date of the request or the date the Additional Advance is funded, (ii) Borrower has submitted to Lender a Notice of Borrowing and (iii) Borrower shall have delivered an Officer’s Certificate certifying that Borrower is in compliance with each of the covenants in Section 5.3 as of the date that the Additional Advance is funded, that no Default or Event of Default exists and that the Additional Advance is being made for the purposes set forth in clauses (a) – (c) of Section 2.1.5 of this Agreement.

2.1.6          Minimum Amounts of Additional Advances and Maximum Number of Tranches. 

With regard to the Loan as a whole, Lender may require that all Additional Advances shall be in a minimum amount of $1,000,000.00.  Borrower shall not have the right to have more than five (5) distinct Interest Periods, in the aggregate, in respect of the Loan (including all Additional Advances to date) in effect at any one time.

2.1.7          Loan Allocations.

Borrower and Lender agree that the amount of the Loan allocated to the Mezzanine Collateral being pledged with respect to each Mezzanine Asset Owner is the Mezzanine Allocated Loan Amount set forth on Schedule B attached hereto.  Borrower and Lender agree that the amount of the Loan allocated to each Individual Property is the Allocated Value set forth on Schedule A attached hereto.

2.1.8          Contributions to Certain Subsidiaries.

Borrower hereby represents, warrants and covenants to and for the benefit of the Lender that it will contribute (a) directly or indirectly to the  applicable Property Guarantor, a portion of the proceeds of the Loan in the amount of the Allocated Value for the Individual Property that such Property Guarantor owns, and such Property Owner shall be permitted to distribute such funds as permitted under its operating agreement and as may be directed by the Mezzanine Property Guarantor as the managing member of the Property Guarantor, including the distribution of funds back to the Borrower's main deposit account for which funds from all properties owned and operated by the Borrower are held, and (b) directly or indirectly to the applicable Mezzanine Asset Owner a portion of the proceeds of the Loan in the amount of the Allocated Loan Amount for the Mezzanine Asset that such Mezzanine Asset Owner is acquiring at the direction of the Mezzanine Subsidiary as its sole member.

Section 2.2             Interest; Extension Options; Loan Payments; Late Payment Charge.

2.2.1          Payments.

(a)           Interest.  Interest on the outstanding principal balance of the Loan shall accrue from the Closing Date through but excluding the Maturity Date at the Applicable Interest Rate.  Interest shall be payable monthly in arrears on each Payment Date.  Any change in the Prime Rate shall be automatically effective as of the day on which such change in rate occurs.  Each determination of an interest rate by Lender pursuant to any provision of this Agreement shall be conclusive and binding on Borrower in the absence of manifest error.

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(b)           Extension of the Initial Maturity Date.  Borrower shall have the option to extend the term of the Loan beyond the Initial Maturity Date for either (x) a term of three (3) months (“Extension Option One”) to a date which is the earlier of (1) July 2, 2007 and (2) the date specified in writing by Borrower which shall not be later than the date that is three (3) months from the Initial Maturity Date (such date in (1) or (2) is the “Option One Maturity Date”) or (y) for a term of six (6) months (“Extension Option Two”) to October 2, 2007 (each such date, the “Extended Maturity Date” and the period from the Initial Maturity Date through the Extended Maturity Date is the “Extension Term”). Borrower may exercise Extension Option One, upon satisfaction of the following terms and conditions:

(i)            Borrower shall have entered into a definitive purchase and sale agreement, asset purchase agreement or merger agreement (or similar agreement for the direct or indirect acquisition of the assets (or a substantial portion thereof) of Borrower) with an unaffiliated third party (except that investors in such third party may include existing limited partners in the Borrower and shareholders in the Trust) (the “Acquiror”) pursuant to which the Acquiror has committed to the purchase and acquisition of Borrower or all or substantially all of Borrower’s assets or the equity interests in Borrower (any of the foregoing, an “Acquisition Transaction”);

(ii)           the Acquisition Transaction shall have been approved by the Board of Trustees of the Trust;

(iii)          the Acquisition Transaction shall not be subject to any financial contingencies or the ability of the Acquiror to obtain financing;

(iv)          the Acquisition Transaction shall only be subject to shareholder, governmental and regulatory approval, to the extent applicable to such Acquisition Transaction;

(v)           Borrower shall have made an announcement to the general public of the Acquisition Transaction;

(vi)          Lender shall have determined in its sole discretion based on a sources and uses statement for the Acquisition Transaction, that (a) if the Acquisition Transaction is in the form of a sale of assets in exchange for cash, the proceeds of the Acquisition Transaction shall be sufficient to pay the Obligations in full or (b) if the Acquisition Transaction is to be consummated by the delivery of some other form of consideration other than cash (i.e., a stock-for-stock or cash-for-stock merger), Lender receives confirmation acceptable to Lender that upon consummation of the Acquisition Transaction the Loan will be repaid in full;

(vii)         no Event of Default shall have occurred and be continuing at the time Extension Option One is exercised nor on the date that the Extension Term commences;

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(viii)        Borrower shall notify Lender of its election to extend the Initial Maturity Date as aforesaid not earlier than ninety (90) days and no later than fifteen (15) days prior to the Initial Maturity Date;

(ix)           Borrower shall have delivered to Lender an Officer’s Certificate in form reasonably acceptable to the Lender certifying that no Event of Default exists, such Officer’s Certificate to be delivered not later than five (5) Business Days from the date that conditions (i)-(vi) above are satisfied;

(x)            Borrower and Lender shall execute and deliver to each other any documents reasonably required to evidence the Extension Term, together with any opinions reasonably required by Lender in connection therewith (which opinions shall be in substantially the same form as the opinions delivered in connection with the closing of the Loan), documents to be delivered not later than five (5) Business Days from the date that conditions (i)-(vi) above are satisfied; and

(xi)           each of the representations and warranties set forth in the Loan Documents shall be true and correct as of the first day of the Extension Term and shall be deemed remade as of the first day of the Extension Term.

In the event (y) that Extension Option One is not exercised or the requirements set forth in clauses (i)-(xi) above are not satisfied on or prior to the Initial Maturity Date or (z) that Extension Option One has been exercised by Borrower and the Acquisition Transaction has not been consummated, Borrower may exercise Extension Option Two, upon satisfaction of the following terms and conditions, provided, that, Extension Option Two shall have a term of three (3) months if Extension Option Two is being exercised pursuant to clause (z) immediately preceding:

(A)          No Event of Default shall have occurred and be continuing at the time Extension Option Two is exercised nor on the date that the Extension Term commences;

(B)           Borrower shall notify Lender of its election to extend the Maturity Date as aforesaid not earlier than ninety (90) days and no later than fifteen (15) days prior to the later of the Initial Maturity Date or the Option One Maturity Date, as the case may be;

(C)           Borrower shall have delivered to Lender an Officer’s Certificate in form reasonably acceptable to the Lender certifying that no Event of Default exists;

(D)          Borrower and Lender shall execute and deliver to each other any documents reasonably required to evidence the Extension Term, together with any opinions reasonably required by Lender in connection therewith (which opinions shall be in substantially the same form as the opinions delivered in connection with the closing of the Loan);

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(E)           Borrower shall have paid to Lender a fee in an amount equal to 2.00% of the outstanding principal balance of the Loan as of the Initial Maturity Date or the Option One Maturity Date, as the case may be;

(F)           each of the representations and warranties set forth in the Loan Documents shall be true and correct as of the first day of the Extension Term and shall be deemed remade as of the first day of the Extension Term; and

(G)           Borrower shall enter into definitive documentation with Lender setting up a lockbox and cash management system acceptable to Lender in its sole and absolute discretion subject, however, to existing cash management arrangements that the Encumbered Property Subsidiaries and Mezzanine Asset Owners are subject to at such time pursuant to their respective mortgage loan documents.

Notwithstanding any notice given from Borrower to extend the Initial Maturity Date as provided for herein, Borrower may at any time prior to the later of the Initial Maturity Date or the Option One Maturity Date, as the case may be, terminate the applicable extension notice without penalty or premium by delivering written notice to Lender, provided, that Borrower shall pay to Lender all of Lender’s reasonable out-of-pocket costs and expenses associated with the anticipated extension.

All references in this Agreement and in the other Loan Documents to the Maturity Date shall mean the applicable Extended Maturity Date in the event that either Extension Option One or Extension Option Two Option is exercised.

In no event shall the Extended Maturity Date be later than October 2, 2007.

2.2.2          Interest Calculation.

Interest on the outstanding principal balance of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate equal to the Applicable Interest Rate divided by three hundred sixty (360) by (c) the outstanding principal balance.

2.2.3          Eurodollar Rate Unascertainable; Illegality; Increased Costs.

(a)           (i)  In the event that Lender shall have determined (which determination shall be conclusive and binding upon Borrower absent manifest error) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining LIBOR, then Lender shall forthwith give, as soon as reasonably practicable, notice by telephone of such determination, to Borrower at least five (5) Business Days prior to the last day of the related Interest Period, with a written confirmation of such determination promptly thereafter.  If such timely notice is given, the Loan shall bear interest at the Adjusted Prime Rate beginning on the first day of the next succeeding Interest Period. (ii) If, pursuant to the terms of this Section ‎2.2.3(a),  the Loan is bearing interest at the Adjusted Prime Rate and Lender shall determine (which determination shall be conclusive and binding upon Borrower absent manifest error)

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that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable, Lender shall give notice thereof to Borrower by telephone of such determination, confirmed in writing, to Borrower as soon as reasonably practical, but in no event later than five (5) Business Days prior to the last day of the then current Interest Period.  If such timely notice is given, the Loan shall bear interest at the Eurodollar Rate beginning on the first day of the next succeeding Interest Period.  Notwithstanding any provision of this Agreement to the contrary, in no event shall Borrower have the right to elect to have the Loan bear interest at either the Eurodollar Rate or the Adjusted Prime Rate.

(b)           If any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Lender in good faith to make or maintain the portion of the Loan bearing interest at the Eurodollar Rate, (I) the obligation of Lender hereunder to make the Loan bearing interest at the Eurodollar Rate shall be canceled forthwith and (II) the Loan shall automatically bear interest at the Adjusted Prime Rate on the next succeeding Payment Date or within such earlier period as required by Applicable Law.  Borrower hereby agrees promptly to pay Lender (within ten (10) Business Days of Lender’s written demand therefor), any additional amounts necessary to compensate Lender for any reasonable costs incurred by Lender in making any conversion in accordance with this Agreement, including, without limitation, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain the Loan hereunder.  Upon written demand from Borrower, Lender shall demonstrate in reasonable detail the circumstances giving rise to Lender’s determination and the calculation substantiating the Adjusted Prime Rate and any additional third-party costs incurred by Lender in making the conversion.  Lender’s written notice of such costs, as certified to Borrower, shall be conclusive absent manifest error.

(c)           In the event that any change in any requirement of any Applicable Law or in the interpretation or application thereof, or compliance in good faith by Lender with any request or directive (whether or not having the force of law) hereafter issued from any Governmental Authority which is generally applicable to all Lenders subject to such Governmental Authority’s jurisdiction:

(i)            shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of LIBOR hereunder;

(ii)           shall, if the Loan is then bearing interest at the Eurodollar Rate, hereafter have the effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender’s policies with respect to capital adequacy) by any amount deemed by Lender to be material; or

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(iii)          shall, if the Loan is then bearing interest at the Eurodollar Rate, hereafter impose on Lender any other condition, the result of which is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder;

then, in any such case, Borrower shall promptly pay Lender (within ten (10) days of Lender’s written demand therefor), any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material.  If Lender becomes entitled to claim any additional amounts pursuant to this Section ‎2.2.3(c), Lender shall provide Borrower with written notice specifying in reasonable detail the event or circumstance by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount.  A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive absent manifest error.  This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under the Note, this Agreement and the other Loan Documents.

(d)           Borrower agrees to indemnify Lender and to hold Lender harmless from any actual third-party out-of-pocket loss or expense which Lender sustains or incurs as a consequence of (I) any default by Borrower in payment of the principal of or interest on the Loan while bearing interest at the Eurodollar Rate, including, without limitation, any such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the Eurodollar Rate, (II) any prepayment (whether voluntary or mandatory) of the Loan on a day that is not the day immediately following the last day of an Interest Period with respect thereto and (III) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the Applicable Interest Rate from the Eurodollar Rate to the Adjusted Prime Rate with respect to any portion of the outstanding principal amount of the Loan then bearing interest at the Eurodollar Rate on a date other than the day immediately following the last day of an Interest Period (the amounts referred to in clauses (I), (II) and (III) are herein referred to collectively as the “Breakage Costs”).  This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under this Agreement and the other Loan Documents.

2.2.4          Payment on Maturity Date.

Borrower shall pay to Lender on the Maturity Date the outstanding principal balance, all accrued and unpaid interest thereon, and all other amounts due hereunder and under the Note, the Security Instruments and the other Loan Documents.

2.2.5          Payments after Default.

Upon the occurrence and during the continuance of an Event of Default, (a) interest on the outstanding principal balance of the Loan and, to the extent permitted by Applicable Law, overdue interest and other amounts due in respect of the Loan, shall accrue at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein and (b) interest at the Default Rate shall be computed from the

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occurrence of the default until the actual receipt and collection of the Debt (or that portion thereof that is then due).  To the extent permitted by Applicable Law, interest at the Default Rate shall be added to the Debt, shall itself accrue interest at the same rate as the Loan and shall be secured by the Pledge Agreement and the Guaranty.  This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default.

2.2.6          Late Payment Charge.

If any principal, interest or any other sums due under the Loan Documents (other than the payment of principal due on the Maturity Date) is not paid by Borrower on the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of four percent (4%) of such unpaid sum or the maximum amount permitted by Applicable Law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.  Any such amount shall be secured by the Pledge Agreement, the Guaranty and the other Loan Documents to the extent permitted by Applicable Law.

2.2.7          Usury Savings.

This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate.  If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder.  All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

2.2.8          Indemnified Taxes.

(a)           All payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, Indemnified Taxes, excluding (i) Indemnified Taxes measured by Lender’s net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which Lender is resident or organized, or any political subdivision thereof, (ii) taxes measured by Lender’s overall net income, and franchise taxes imposed on it, by the jurisdiction of Lender’s applicable lending office or any political subdivision thereof or in which Lender is resident or engaged in business, and (iii) withholding taxes imposed by the United States of America, any state, commonwealth, protectorate territory or any political subdivision or taxing authority

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thereof or therein as a result of the failure of Lender which is a Non-U.S. Entity to comply with the terms of paragraph (b) below.  If any non excluded Indemnified Taxes are required to be withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all non excluded Indemnified Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder.  Whenever any non excluded Indemnified Tax is payable pursuant to Applicable Law by Borrower, Borrower shall send to Lender an original official receipt showing payment of such non excluded Indemnified Tax or other evidence of payment reasonably satisfactory to Lender.  Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such non excluded Indemnified Tax when due to the appropriate taxing authority or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence.

(b)           In the event that Lender or any successor and/or assign of Lender is not incorporated under the laws of the United States of America or a state thereof (a “Non-U.S. Entity”) Lender agrees that, prior to the first date on which any payment is due such entity hereunder, it will deliver to Borrower two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as the case may be, certifying in each case that such entity is entitled to receive payments under the Note, without deduction or withholding of any United States federal income taxes.  Each entity required to deliver to Borrower a Form W-8BEN or W-8ECI pursuant to the preceding sentence further undertakes to deliver to Borrower two further copies of such forms, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such form expires (which, in the case of the Form W-8ECI, is the last day of each U.S. taxable year of the Non-U.S. Entity) or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to Borrower, and such other extensions or renewals thereof as may reasonably be requested by Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such entity is entitled to receive payments under the Note without deduction or withholding of any United States federal income taxes, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such entity from duly completing and delivering any such form with respect to it and such entity advises Borrower that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

Section 2.3             Prepayments.

2.3.1          Voluntary Prepayments.

Except as otherwise expressly provided herein, Borrower shall have the right to prepay the Loan in whole or in part at any time provided that:

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(a)           Borrower shall provide prior written notice to Lender specifying the date (the “Prepayment Date”) upon which the prepayment is to be made, which notice shall be delivered to Lender not less than five (5) days prior to such payment; and

(b)           Borrower shall pay to Lender, simultaneously with such prepayment, (i) all accrued and unpaid interest calculated at the Applicable Interest Rate on the amount of principal being prepaid through and including the Prepayment Date (or if the Prepayment Date is a Payment Date, excluding the Prepayment Date if such payment is made in accordance with Section 2.3.4 hereof), (ii) Breakage Costs, if any, without duplication of any sums paid pursuant to the preceding clause (i); and (iii) upon repayment of the Loan as a whole, all other sums then due under this Agreement, the Note or the other Loan Documents.

If a notice of prepayment is given by Borrower to Lender pursuant to this Section 2.3.1, the amount designated for prepayment and all other sums required under this Section 2.3.1 shall be due and payable on the Prepayment Date.  Notwithstanding any notice of prepayment given by Borrower, Borrower may at any time prior to the Prepayment Date terminate the applicable prepayment notice without penalty or premium by delivering written notice to Lender, provided, that Borrower shall pay to Lender all of Lender’s reasonable out-of-pocket costs and expenses associated with the anticipated prepayment. 

2.3.2          Mandatory Prepayments.

(a)           On each date on which Borrower actually receives any Net Proceeds, if Lender is not obligated and elects not to make such Net Proceeds available to Borrower for the restoration of the Property pursuant to Section 6.4, Borrower shall prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Proceeds not made available by Lender for restoration and Lender shall apply such Net Proceeds to the reduction of the Debt when received.  To the extent Net Proceeds not made available by Lender for restorations with respect to an Individual Property are less than the Allocated Value for such Individual Property, any amount so applied against the Debt shall be deemed credited against the Allocated Value for such Individual Property.

(b)           On each date on which Borrower, any Mezzanine Subsidiary, Mezzanine Asset Owner or Encumbered Property Subsidiary actually receives any Capital Proceeds (other than Capital Proceeds received with respect to the Refinancing of (i) the Encumbered Property referred to as “University Crossings” located in Philadelphia, Pennsylvania and (ii) the Mezzanine Assets referred to as Orchard Trails and The Enclave II and located in Orono, Maine and Bowling Green, Ohio, respectively), Borrower shall, without limiting the provisions of Sections 2.4 and 2.5 hereof, prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Capital Proceeds, provided, that, with respect to Capital Proceeds received in connection with a sale or Refinance of an Encumbered Property, such Capital Proceeds shall not be less than, and Borrower shall prepay the Loan in the minimum amount of, the applicable Encumbered Property Allocated Value.  Lender shall apply all such Capital Proceeds to the reduction of the Debt on the date received if

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received prior to 2:00 p.m., Charlotte, North Carolina time, or on the first (1st) Business Day following the date of its receipt thereof if received after 2:00 p.m., Charlotte, North Carolina time.

(c)           On the closing date of an Acquisition Transaction, the Debt shall be repaid in full notwithstanding that the Maturity Date may not yet have occurred.

2.3.3          Making of Payments.

Each payment by Borrower hereunder or under the Note shall be made in funds settled through the New York Clearing House Interbank Payments System or other funds immediately available to Lender by 2:00 p.m., Charlotte, North Carolina time, on or prior to the date such payment is due, to Lender by deposit to such account as Lender may designate by written notice to Borrower, which notice shall include wire transfer instructions and shall be delivered to Borrower at least five (5) Business Days prior to any change becoming effective.  Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the first Business Day preceding such scheduled due date.

2.3.4          Application of Prepayments.

All prepayments received pursuant to ‎Section 2.3 shall be applied first, to interest on the outstanding principal balance being prepaid that accrued through and including the Prepayment Date, and second, to the payments of principal due under the Loan in the inverse order of maturity.

Section 2.4             Prohibition on Sale of Individual Property(ies). 

Borrower shall not permit any Property Guarantor to sell the Individual Property that it owns unless and until each of the following conditions are satisfied:

(a)           Borrower and the related Property Guarantor shall provide Lender with at least twenty (20) days but no more than sixty (60) days prior written notice of its request to obtain a release of the Individual Property.  Notwithstanding any notice given from Borrower and the related Property Guarantor to request a release of an Individual Property, Borrower may at any time prior to the actual release of such Individual Property terminate the applicable request notice without penalty or premium by delivering written notice to Lender, provided, that Borrower shall pay to Lender all of Lender’s reasonable actual out-of-pocket costs and expenses associated with the anticipated release;

(b)           Lender shall have received a wire transfer of immediately available federal funds in an amount equal to the greater of (x) the applicable Release Price and (y) Capital Proceeds with respect to such Individual Property, less any proceeds of casualty or condemnation retained by Lender for the applicable Individual Property, together with (i) all accrued and unpaid interest calculated at the Applicable Interest Rate on the amount of principal being prepaid through and including the Prepayment Date, (ii) Breakage Costs, if any, without duplication of any sums paid pursuant to the

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preceding clause (i); and (iii) all other sums due under this Agreement, the Note or the other Loan Documents in connection with a partial prepayment;

(c)           Borrower shall submit to Lender, not less than five (5) Business Days prior to the date of such release, a release of Lien of the applicable Security Instrument  for such Individual Property for execution by Lender.  Such release shall be in a form appropriate in each State in which the Individual Property is located and shall contain standard provisions, if any, protecting the rights of the releasing lender.  In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in order to evidence compliance with the requirements set forth in this Section 2.4.  In the event that Borrower fails to provide Lender such release of Lien, Lender shall, upon satisfaction of all the other requirements set forth in this subsection (c), deliver to Borrower such release in such form reasonably acceptable to Lender;

(d)           In the event that the applicable Mezzanine Property Guarantor owning an interest in the applicable Property Guarantor obtaining a release of the Lien of the related Security Instrument shall continue to own an interest in any other Property Guarantor owning any Individual Property still encumbered by a Security Instrument (after giving effect to such release), such Mezzanine Property Guarantor shall transfer any interest it owns in the applicable Borrower obtaining such release to a Person other than Borrower or Mezzanine Property Guarantor;

(e)           Lender shall have received payment of all Lender’s reasonable third-party costs and expenses and reasonable counsel fees and disbursements incurred in connection with the release of the Individual Property from the lien of the related Security Instrument and the review and approval of the documents and information required to be delivered in connection therewith; and

(f)            In the event the Individual Property is being released in connection with a Refinancing of such Individual Property, Borrower shall have paid to Lender a fee in the amount of one percent (1%) of the principal amount of the Loan being repaid if such Refinancing is not funded or placed by Lender or an Affiliate of Lender.

Section 2.5             Prohibition on Sale of Mezzanine Assets. 

Borrower shall not permit any Mezzanine Subsidiary to cause or permit the applicable Mezzanine Asset Owner to sell such Mezzanine Asset unless and until each of the following conditions are satisfied:

(a)           Borrower and the related Mezzanine Subsidiary shall provide Lender with at least twenty (20) days but no more than sixty (60) days prior written notice of its request to obtain a release of the pledge of the direct or indirect equity interests in any Mezzanine Subsidiary, Mezzanine Property Guarantor or Mezzanine Asset Owner (any such collateral, the “Mezzanine Collateral”) related to a Mezzanine Asset that is the subject of a Capital Event.  Notwithstanding any notice given from Borrower and a Mezzanine Subsidiary to request a release of Mezzanine Collateral, Borrower may at

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any time prior to the actual release of such Mezzanine Collateral terminate the applicable request notice without penalty or premium by delivering written notice to Lender, provided, that Borrower shall pay to Lender all of Lender’s reasonable actual out-of-pocket costs and expenses associated with the anticipated release of the Mezzanine Collateral;

(b)           Lender shall have received a wire transfer of immediately available federal funds in an amount equal to the greater of (x) the applicable Mezzanine Collateral Release Price and (y) the Capital Proceeds with respect to such Mezzanine Asset, together with (i) all accrued and unpaid interest calculated at the Applicable Interest Rate on the amount of principal being prepaid through and including the Prepayment Date, (ii) Breakage Costs, if any, without duplication of any sums paid pursuant to the preceding clause (i); and (iii) all other sums due under this Agreement, the Note or the other Loan Documents in connection with a partial prepayment;

(c)           Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in order to evidence compliance with the requirements set forth in this Section 2.5.  Lender shall, upon satisfaction of all the other requirements set forth in this Section 2.5, deliver to Borrower a release of the Mezzanine Collateral, such release to be in form reasonably acceptable to Lender; and

(d)           Lender shall have received payment of all Lender’s reasonable third-party costs and expenses and reasonable counsel fees and disbursements incurred in connection with the release of the Individual Property from the lien of the related Security Instrument and the review and approval of the documents and information required to be delivered in connection therewith.

Section 2.6             No Offsets. 

The Borrower hereby waives the right to assert a counterclaim in any action or proceeding brought against it by Lender or their agents or otherwise to offset any obligations to make the payments required by the Loan Documents.  No failure by Lender to perform any of its obligations hereunder shall be a valid defense to, or result in any offset against, any payments which Borrower is obligated to make under any of the Loan Documents.  The Obligations of Borrower under this Agreement and the other Loan Documents shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower, or any other party, against the Lender by reason of the Lender's failure to perform its obligations under this Agreement, including, without limitation, the failure of the Lender to fund any Additional Advance.  The Borrower hereby acknowledges the Borrower shall have no claim against any subsequent holder of the funded portion of the Loan for any Additional Advance not funded by the Lender. 

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ARTICLE III

RESERVED

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.1             Borrower Representations.

Borrower for itself and for each Key Entity (where applicable in this Article IV) represents and warrants that:

4.1.1        Organization.

Each of the Key Entities and the Encumbered Property Subsidiaries is duly organized and is validly existing and in good standing in the jurisdiction in which it is organized, with requisite power and authority to transact the businesses in which it is now engaged.  Each Key Entity possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to transact the businesses in which it is now engaged.  Each Encumbered Property Subsidiary possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to transact the businesses in which it is now engaged, except to the extent such failure is not reasonably likely to have a Material Adverse Effect.  Attached hereto as Schedule 4.1.1 is a true, correct and complete organizational chart of Borrower, each of the Key Entities, and each of the Encumbered Property Subsidiaries.

4.1.2        Proceedings.

Each of the Key Entities has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to the extent such Key Entity is a party thereto.  This Agreement and the other Loan Documents have been duly executed and delivered by or on behalf of each of the Key Entities, to the extent such Key Entity is a party thereto.

4.1.3        No Conflicts.

The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower and the Key Entities that are a party thereto will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any Lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of such Key Entity pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement, or other agreement or instrument to which such Key Entity is a party or by which any of such Key Entity’s property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over a Key Entity or any of the Properties or Mezzanine Assets or any of any Key Entity’s other assets, or any license or other approval required to operate the

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Properties or Mezzanine Assets, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by each Key Entity (to the extent a party thereto) of this Agreement or any other Loan Documents have been obtained and is in full force and effect.

4.1.4        Litigation.

As of the date hereof, except as set forth on Schedule 4.1.4 attached hereto, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or threatened in writing against or affecting (i) any Key Entity or any Individual Property or Mezzanine Asset which are, individually or in the aggregate,  reasonably likely to materially adversely affect the financial condition or business of any Key Entity or the condition or ownership of any Individual Property, Mezzanine Asset or Encumbered Property, and (ii) any of the Encumbered Property Subsidiaries or Encumbered Properties which are, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on the financial condition or business of the Encumbered Property Subsidiaries or the condition or ownership of the Encumbered Properties.

4.1.5        Agreements.

No Key Entity is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which such Key Entity or any of the Properties or Mezzanine Assets is bound which might materially and adversely affect any Key Entity or any Individual Property or Mezzanine Asset.  No Encumbered Property Subsidiary is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which such Encumbered Property Subsidiary or Encumbered Property is bound which might have a Material Adverse Effect on the Encumbered Property Subsidiaries or the Encumbered Properties.  Borrower has no material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a party or by which Borrower or any Property Guarantor, Mezzanine Asset Owner, Individual Property or Mezzanine Asset is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of such Individual Property or Mezzanine Asset, (b) obligations set forth in the Permitted Encumbrances and (c) obligations under the Loan Documents.  No Key Entity has any material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Key Entity is a party or by which such Key Entity or any Mezzanine Asset is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of such Individual Property or Mezzanine Asset and (b) obligations of such Key Entity under the Loan Documents or the loan documents with respect to the related Mezzanine Asset which have been disclosed to Lender prior to the date hereof.  No Encumbered Property Subsidiary has any material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Encumbered Property Subsidiary is a party or by which such Encumbered Property Subsidiary or any related Encumbered Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of such Encumbered Property and (b) obligations of such Encumbered Property Subsidiary under the loan documents with respect to the related Encumbered Property

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which have been disclosed to Lender prior to the date hereof, and except to the extent would not have a Material Adverse Effect.

4.1.6        Solvency.

Borrower (a) has not entered into the transaction or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b) has received reasonably equivalent value in exchange for its obligations under the Loan Documents.  Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.  Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted.  Borrower does not intend to incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower).  No petition under the Bankruptcy Code or similar state bankruptcy or insolvency law has been filed against Borrower or any constituent Person in the last seven (7) years, and neither Borrower nor any constituent Person in the last seven (7) years has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors.  Borrower is not contemplating either the filing of a petition by it under the Bankruptcy Code or similar state bankruptcy or insolvency law or the liquidation of all or a major portion of Borrower’s assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it.

4.1.7        OFAC.

Borrower represents and warrants that no Key Entity, no Encumbered Property Subsidiary nor any Guarantor nor any of their respective Affiliates is a Prohibited Person, and each Key Entity, Encumbered Property Subsidiary and Guarantor and their respective Affiliates are in full compliance with all applicable orders, rules, regulations and recommendations of The Office of Foreign Assets Control of the U.S. Department of the Treasury.

4.1.8        No Plan Assets.

Borrower is not a Plan, and none of the assets of Borrower constitute or will constitute “Plan Assets” of one or more Plans.  In addition, (a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject to State statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Agreement.

4.1.9        Compliance.

Each Key Entity and each of the Properties and the Mezzanine Assets and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, all Environmental Laws, building and zoning ordinances and codes. Each

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Encumbered Property Subsidiary and each Encumbered Property and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, all Environmental Laws, building and zoning ordinances and codes except to the extent and such non-compliance would not have a Material Adverse Effect. No Key Entity is in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority which could have a material adverse affect on any Key Entity or any of the Properties or the Mezzanine Assets.  None of the Encumbered Property Subsidiaries are in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority which is reasonably likely to have a Material Adverse Effect.  There has not been committed by any Key Entity or to Borrower’s knowledge, any other Person in occupancy of or involved with the operation or use of the Properties or the Mezzanine Assets any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against any of the Individual Properties or the Mezzanine Assets or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  There has not been committed by any Encumbered Property Subsidiary any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against any of the Encumbered Properties or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents, except to the extent would not have a Material Adverse Effect.

4.1.10      Financial Information.

All financial data, including, without limitation, the consolidated statements of cash flow and consolidated income and operating expense, that have been delivered to Lender in respect of any of the Key Entities and any of the Encumbered Property Subsidiaries (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of the applicable Key Entities or Encumbered Property Subsidiaries, as applicable, as of the date of such reports, and (iii) have, if applicable, been prepared in accordance with GAAP (subject, as to any interim statements, to year-end adjustments and the absence of footnotes) throughout the periods covered, except as disclosed therein.  Except for Permitted Encumbrances, (i) no Key Entity has any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a materially adverse effect on any Individual Property or Mezzanine Asset or the operation thereof as residential buildings containing other appurtenant and related uses, and (ii) none of the Encumbered Property Subsidiaries has any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and, individually or in the aggregate, are reasonably likely to have a materially adverse effect on the Encumbered Properties, taken as a whole, or the operation thereof as residential buildings containing other appurtenant and related uses, except as referred to or reflected in said financial statements.  Since the date of such financial statements, there has been no material adverse change in the financial condition, operations or business of any Key Entity from that set forth in such entity’s financial statements, and there has been no material adverse change in the financial condition, operations or business of the Encumbered Property Subsidiaries, taken as a whole, from that set forth in such entities’ financial statements.

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4.1.11      Condemnation.

No Condemnation or other similar proceeding has been commenced or, is threatened or contemplated in writing with respect to all or any portion of any Individual Property, Mezzanine Asset or Encumbered Property or for the relocation of roadways providing access to any Individual Property, Mezzanine Asset or Encumbered Property.

4.1.12      Federal Reserve Regulations.

No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents.

4.1.13      Utilities and Public Access.

(a)           Each tenant-occupied Individual Property and Mezzanine Asset has rights of access to public ways and is served by public water, sewer, sanitary sewer and storm drain facilities adequate to service such Individual Property or Mezzanine Asset, as the case may be, for its respective intended uses.  All public utilities necessary or convenient to the full use and enjoyment of each Individual Property and Mezzanine Asset are located either in the public right-of-way abutting each Individual Property or  Mezzanine Asset (which are connected so as to serve each Individual Property or  Mezzanine Asset, as the case may be, without passing over other property) or in recorded easements serving each Individual Property or Mezzanine Asset.  All roads necessary for the use of each Individual Property, Mezzanine Asset and Encumbered Property for their current respective purposes have been completed, are physically open and are dedicated to public use and have been accepted by all Governmental Authorities.

(b)           Each tenant-occupied Encumbered Property has rights of access to public ways and is served by public water, sewer, sanitary sewer and storm drain facilities adequate to service such Encumbered Property for its intended uses except to the extent any failure to have such rights and service would not have a Material Adverse Effect.  All public utilities necessary or convenient to the full use and enjoyment of each Encumbered Property are located either in the public right of way abutting each Encumbered Property (which are connected so as to serve each Encumbered Property without passing over other property) or in recorded easements serving each Encumbered Property except to the extent that such failure for such utilities to be so located would not have a Material Adverse Effect.

4.1.14      Not a Foreign Person.

Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.

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4.1.15      Separate Lots.

Each Individual Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of such Individual Property.

4.1.16      Assessments.

As of the date hereof, to the best of Borrower’s knowledge, there are no pending or proposed special or other assessments for public improvements or otherwise affecting any Individual Property, nor are there any contemplated improvements to any Individual Property that may result in such special or other assessments.

4.1.17      Enforceability.

The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by any Key Entity that is a party thereto, including the defense of usury, and no Key Entity has asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

4.1.18      No Prior Assignment.

There are no prior assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding.

4.1.19      Insurance.

Borrower has obtained and has delivered to Lender insurance abstracts and certificates of insurance reasonably acceptable to Lender, reflecting the insurance coverages, amounts and other requirements set forth in this Agreement.  Borrower, and to the best of Borrower’s knowledge, no other Person, has done, by act or omission, anything which would materially impair the coverage of any such policy.

4.1.20      Use of Property.

Each Individual Property is substantially used exclusively for student housing. Each Mezzanine Asset is substantially used exclusively for student housing.

4.1.21      Certificate of Occupancy; Licenses.

Each Key Entity, to the extent the owner of a property, has obtained and shall keep and maintain all material certifications, permits, licenses and approvals, including without limitation, certificates of completion and occupancy permits required for the legal use, occupancy and operation of each Individual Property, Mezzanine Asset and Encumbered Property  by the applicable Key Entity as student housing and other appurtenant and related uses.

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4.1.22      Flood Zone.

Either (a) none of the Improvements on any Individual Property or Mezzanine Asset are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards or (b) the flood insurance required pursuant to ‎Section 6.1(a)(vii) is in full force and effect with respect to each such Individual Property or Mezzanine Asset. To Borrower’s knowledge, either (a) none of the Improvements on any Encumbered Property are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards or (b) the flood insurance required by the related Encumbered Property Subsidiary’s mortgage loan documents is in full force and effect.

4.1.23      Physical Condition.

(a)           Each Individual Property and Mezzanine Asset, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects.  There exists no structural or other material defects or damages in any Individual Property or Mezzanine Asset, whether latent or otherwise and neither Borrower nor any Mezzanine Asset Owner has received written notice from any insurance company or bonding company of any defects or inadequacies, whether latent or otherwise, in any Individual Property or Mezzanine Asset, or any part thereof, which would materially adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.  Each Individual Property and Mezzanine Asset is free from damage covered by fire or other casualty insurance.  No substantial construction is currently being performed at any Individual Property or Mezzanine Asset other than routine maintenance and repairs.

(b)           Each Encumbered Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects except where such failure would not have a Material Adverse Effect.  There exists no structural or other material defects or damages in any Encumbered Property which would be reasonably likely to have a Material Adverse Effect, whether latent or otherwise and no Borrower nor any Encumbered Property Subsidiary has received written notice from any insurance company or bonding company of any defects or inadequacies, whether latent or otherwise, in the Encumbered Properties taken as a whole which would be reasonably likely to have a Material Adverse Effect, materially and adversely the insurability of the same as a whole or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond related to the Encumbered Properties taken as a whole.  Each Encumbered Property is free from damage covered by fire or other casualty insurance except any such damage that is not reasonably likely to have a Material Adverse Effect.

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No substantial construction is currently being performed at any Encumbered Property other than routine maintenance and repairs except to the extent such construction is not reasonably likely to have a Material Adverse Effect.

4.1.24         Boundaries.

All of the material improvements which were included in determining the appraised value of each Individual Property, Mezzanine Asset and Encumbered Property lie wholly within the boundaries and building restriction lines of such Individual Property, Mezzanine Asset or Encumbered Property, (b) no improvements on adjoining properties encroach upon such Individual Property, Mezzanine Asset or Encumbered Property, and (c) no easements or other encumbrances upon the applicable Individual Property, Mezzanine Asset or Encumbered Property encroach upon any of the improvements located thereon, in each case that is reasonably likely to have a Material Adverse Effect.

4.1.25         Leases.

(a)           Mezzanine Asset Owner and Property Guarantor are the owners and lessors of landlord’s interest in the Leases.  No Person has any possessory interest in any Individual Property or Mezzanine Asset or right to occupy the same except under and pursuant to the provisions of the Leases or the Permitted Encumbrances.  As of the date hereof, the current Leases are in full force and effect and there are no material defaults by Mezzanine Asset Owner and Property Guarantor or, to Borrower’s knowledge any tenant under any Lease, and, there are no conditions that, with the passage of time or the giving of notice, or both, would constitute a material default under any Lease.  Not more than 10% of the Rents at any Individual Property have been paid more than four (4) months in advance of its due date.  As of the date hereof, there are no offsets or defenses to the payment of any portion of the Rents.  As of the date hereof, all work required (if any) to be performed by Mezzanine Asset Owner or Property Guarantor under each Lease as of the date hereof has been performed in all material respects as required and has been accepted by the applicable tenant, and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Mezzanine Asset Owner or Property Guarantor to any tenant has already been received by such tenant except to the extent the failure of the foregoing representation to be true is not reasonably likely to have a Material Adverse Effect.  As of the date hereof, there has been no prior sale, transfer or assignment, hypothecation or pledge of Mezzanine Asset Owner’s or Property Guarantor’s interest in any Lease or of the Rents received therein which is still in effect.  No tenant under any Lease has a currently effective option (or an option that will take effect in the future) pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are a part.  No tenant under any Lease has a currently effective right (or a right that will take effect in the future) of first offer or refusal to purchase all or any part of the leased premises or the building of which the leased premises are a part.  To the best of Borrower’s knowledge, no Hazardous Materials have been disposed, stored or treated by any tenant under any Lease on or about the leased premises in violation of Environmental Law nor does Mezzanine Asset Owner or Property Guarantor have any knowledge of any tenant’s intention to use its leased premises for

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any activity which, directly or indirectly, involves the use, generation, treatment, storage, disposal or transportation of any Hazardous Materials, except those that are both (i) in compliance with current Environmental Laws and with permits issued pursuant thereto (if such permits are required), and (ii) either (A) in amounts not in excess of that necessary to operate, clean, repair and maintain the applicable Individual Property or Mezzanine Asset or each tenant’s respective business at such Individual Property or Mezzanine Asset as set forth in their respective Leases, (B) held by a tenant for sale to the public in its ordinary course of business, or (C) fully disclosed to and approved by Lender in writing pursuant to the environmental reports delivered to Lender in connection with the Loan.

4.1.26      Survey.

To the best of Borrower’s knowledge, the Survey for each Individual Property delivered to Lender in connection with this Agreement does not fail to reflect any material matter affecting such Individual Property or the title thereto.

4.1.27      Embargoed Person.

As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of any Key Entity, Encumbered Property Subsidiary or Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower, any Key Entity, Encumbered Property Subsidiary or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan made by the Lender is in violation of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in any Key Entity, Encumbered Property Subsidiary or Guarantor or any Affiliate thereof, as applicable, with the result that the investment in any Key Entity, Encumbered Property Subsidiary or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of any Key Entity, Encumbered Property Subsidiary or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in any Key Entity or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.

4.1.28      Filing and Recording Taxes.

All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Security Instruments, have been paid.

4.1.29      Covenant Compliance.

On  the date hereof Borrower has delivered to Lender an Officer’s Certificate pursuant to which Borrower certified to Lender Borrower’s compliance with each of the

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covenants set forth in Sections 5.3 and 5.4 hereof calculated on a proforma basis for the year ending December 31, 2006 and which was accompanied by all applicable financial calculations (the “Compliance Statement”).  Borrower represents and warrants to Lender that all information and certifications set forth in the Compliance Statement are complete, true and correct as of the date hereof.  In connection with any Compliance Certificate required to be delivered pursuant to this Agreement, such Compliance Certificate may exclude any updates of representations and warranties as to proforma calculations of financial covenant compliance.

4.1.30      Management Agreement.

The Management Agreements are in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder.

4.1.31      Illegal Activity.

No portion of any Individual Property or any Mezzanine Asset has been purchased with proceeds of any illegal activity.

4.1.32      No Change in Facts or Circumstances; Disclosure.

All information submitted by Borrower or any other Key Entity to Lender and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof are, as of the date hereof, accurate, complete and correct in all material respects.  No statement of fact made by Borrower or any Key Entity in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading in any material respect.  There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect the use, operation or value of the Properties, the Mezzanine Assets or the Encumbered Properties or the business operations or the financial condition of Borrower or any Guarantor.  Borrower has not failed to disclose any material fact that is reasonably likely to have a material adverse effect on the financial condition of Borrower or any Key Entity or the condition or ownership of any Individual Property, Mezzanine Asset or Encumbered Property.

4.1.33      Investment Company Act.

Borrower is not (a) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; or (b) subject to any other federal or State law or regulation which purports to restrict or regulate its ability to borrow money.

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4.1.34      Principal Place of Business; State of Organization.

Borrower’s principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Agreement.  Borrower’s organizational identification number is 3806640.

4.1.35      Special Purpose Entities.

Borrower shall cause each Property Guarantor, each Mezzanine Property Guarantor, each Mezzanine Subsidiary, each Mezzanine Asset Owner and each Encumbered Property Subsidiary to be, at all times, a Special Purpose Entity.

4.1.36      Business Purposes.

The Loan is solely for the general business purpose of Borrower, and is not for personal, family, household, or agricultural purposes.

4.1.37      Taxes.

Each Key Entity has filed all material federal, State, county, municipal, and city income and other tax returns required to have been filed by it and has paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by it.  As of the date hereof, Borrower knows of no basis for any additional assessment in respect of any such taxes and related liabilities for prior years.

4.1.38      Forfeiture.

No Key Entity nor to the best of Borrower’s knowledge any other Person in occupancy of or involved with the operation or use any of the Properties, Mezzanine Assets or Encumbered Properties has committed any act or omission affording the federal government or any State or local government the right of forfeiture as against any of the Properties, Mezzanine Assets or Encumbered Properties or any part thereof or any monies paid in performance of Borrower’s obligations under the Note, this Agreement or the other Loan Documents.  Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture.

4.1.39      Environmental Representations and Warranties.

Borrower represents and warrants, that: (a) there are no Hazardous Materials or underground storage tanks in, on, or under any of the Properties or Mezzanine Assets except those that are both (i) in compliance with current Environmental Laws and with permits issued pursuant thereto (if such permits are required), and (ii) either (A) in amounts not in excess of that necessary to operate, clean, repair and maintain the applicable Individual Property or Mezzanine Asset or each tenant’s respective business at such Individual Property or Mezzanine Asset as set forth in their respective Leases, or (B) held by a tenant for sale to the public in its ordinary course of business, (b) there are no past, present or threatened Releases of Hazardous Materials in violation of any Environmental Law and which would require remediation by a Governmental Authority in, on, under or from any of the Properties or Mezzanine Assets (except to the extent

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such remediation has been approved by the applicable Governmental Authority); (c) to Borrower’s knowledge there is no threat of any Release of Hazardous Materials migrating to any of the Properties or Mezzanine Assets; (d) there is no past or present non-compliance with current Environmental Laws, or with permits issued pursuant thereto, in connection with any of the Properties or Mezzanine Assets; (e) neither Borrower, nor any other Key Entity knows of, nor has received, any written notice from any Person (including but not limited to a Governmental Authority) relating to Hazardous Materials in, on, under or from any of the Properties or Mezzanine Assets in violation of Environmental Laws; and (f) each Key Entity has truthfully and fully provided to Lender, in writing, any and all information of which it is aware relating to environmental conditions in, on, under or from any of the Properties or Mezzanine Assets known to any Key Entity or contained in any Key Entity’s files and records, including but not limited to any reports relating to Hazardous Materials in, on, under or migrating to or from any of the Properties, Mezzanine Assets or Encumbered Properties and/or to the environmental condition of the Properties or Mezzanine Assets.  Borrower represents and warrants that each of the representations and warranties set forth in clause (a)-(f) above are true with respect to the Encumbered Properties except to the extent that the failure of such representation or warranty to be true is not reasonably likely to have a Material Adverse Effect.

4.1.40      Taxpayer Identification Number.

Borrower’s United States taxpayer identification number is 20-1162699.

4.1.41      Military Contracts.

Borrower hereby represents and warrants to Lender that none of the contracts related to the ownership, equity, management, development or construction that Borrower or a Subsidiary of Borrower (including without limitation, GMH Military Housing Development LLC, GMH Military Housing Construction LLC, GMH Military Housing Management LLC and GMH Military Housing Investments LLC) is a party to, or has an interest in, with respect to Military Housing Projects can be assigned by such party to Lender as direct or indirect collateral for the Loan without the consent or approval of third parties, which consent or approval has not been obtained.

4.1.42      Representations and Warranties with respect to Encumbered Property Subsidiaries.

Borrower hereby represents and warrants to Lender that each of the representations and warranties set forth in this Section 4.1 are true and correct as to each Encumbered Property Subsidiary as if such representations and warranties were specifically made as to each Encumbered Property Subsidiary except to the extent that any such failure of the representation or warranty to be true as to the Encumbered Property Subsidiaries would not have a Material Adverse Effect.

Section 4.2             Survival of Representations.

Borrower agrees that all of the representations and warranties set forth in ‎Section 4.1 and elsewhere in this Agreement, the Pledge Agreement, the Security Instruments and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under

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this Agreement or any of the other Loan Documents by Borrower or any Guarantor.  All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower or any Key Entity shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.

ARTICLE V

BORROWER COVENANTS

Section 5.1             Affirmative Covenants.

From the date hereof and until payment and performance in full of all Obligations of Borrower under the Loan Documents, Borrower for itself and for each Key Entity hereby covenants and agrees with Lender that:

5.1.1        Existence; Compliance with Legal Requirements.

(a)           Borrower shall cause each Key Entity to do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises, and comply, in all material respects, with all Legal Requirements applicable to it and the Properties, the Mezzanine Assets and Encumbered Properties except to the extent the failure to do so would not reasonably be expected to have a material adverse affect on the financial condition or business of any Key Entity or the condition or ownership of any Individual Property, Mezzanine Asset or Encumbered Property.  There shall never be committed by any Key Entity or any Affiliate of any Key Entity in occupancy of or involved with the operation or use of any Individual Property, Mezzanine Asset or Encumbered Property any act or omission affording the federal government or any State or local government the right of forfeiture against any Individual Property, Mezzanine Asset or Encumbered Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  Each Key Entity shall use its best efforts to cause no other Person in occupancy of or involved with the operation or use of the Properties, the Mezzanine Assets and Encumbered Properties to perform any act or omission affording the federal government or any State or local government the right of forfeiture against any Individual Property, Mezzanine Asset or Encumbered Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture. Each Key Entity shall keep the Properties, the Mezzanine Assets and Encumbered Properties in good working order and repair (ordinary wear and tear excepted), and from time to time make, or cause to be made, all commercially reasonably necessary repairs, renewals, replacements, betterments and improvements thereto.  Borrower shall cause each Key Entity to operate any Individual Property, Mezzanine Asset or Encumbered Property that is the subject of any O&M Program in accordance with the terms and provisions thereof in all material respects.

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(b)           After prior written notice to Lender, Borrower or Property Guarantor, at its own expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or Property Guarantor or any Individual Property or any alleged violation of any Legal Requirement, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower or Property Guarantor is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all Applicable Laws; (iii) no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower or Property Guarantor shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (v) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or Property Guarantor or any Individual Property; and (vi) Borrower or Property Guarantor shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith.  Lender may apply any such security or part thereof, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or any Individual Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost.

(c)           Borrower shall not cause or permit any Mezzanine Subsidiary or Mezzanine Asset Owner to contest any Legal Requirement unless such contest is conducted in accordance with, and subject to the provisions of, clause (b) above.

5.1.2        Taxes and Other Charges.

(a)           Borrower shall pay or cause Property Guarantor to pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Properties or any part thereof as the same become due and payable.  Borrower or Property Guarantor shall furnish to Lender evidence for the payment of all material Taxes and the Other Charges prior to the date the same shall become delinquent and shall promptly deliver to Lender receipts evidencing such payment as soon as they become available.  Neither Borrower nor Property Guarantor shall suffer and shall promptly cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Properties, and shall promptly pay for all utility services provided to the Properties for which Borrower is liable.  After prior written notice to Lender, Borrower or Property Guarantor, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower or Property Guarantor is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all

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Applicable Laws; (iii) no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower or Property Guarantor shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the applicable Individual Property; and (vi) Borrower or Property Guarantor shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender (including, without limitation, the posting of a bond acceptable to Lender), to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon.  Lender may apply such security or part thereof held by Lender at any time when, in the reasonable judgment of Lender, the validity or applicability of such Taxes or Other Charges are established or any Individual Property (or part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of any Security Instrument being primed by any related Lien.

(b)           Borrower shall not suffer, nor permit any Mezzanine Subsidiary or Mezzanine Asset Owner to suffer, and shall promptly cause to be paid and discharged, any Lien or charge whatsoever which may be or become a Lien or charge against any Mezzanine Asset, and shall promptly pay for all utility services provided to the Mezzanine Assets for which any Mezzanine Subsidiary or Mezzanine Asset Owner is liable.  Borrower shall not cause or permit any Mezzanine Subsidiary or Mezzanine Asset Owner to contest any Taxes or Other Charges unless such contest is conducted in accordance with, and subject to the provisions of, clause (a) above.

5.1.3        Litigation.

After written receipt thereof by Borrower or any Key Entity, Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened against any Key Entity or any Guarantor which might materially adversely affect (the financial) condition or business of any Key Entity or any Guarantor or the condition or ownership of any Individual Property, Mezzanine Asset or Encumbered Property.

5.1.4        Access to Properties.

Borrower shall permit, and shall cause each applicable Key Entity to permit, agents, representatives and employees of Lender to inspect the Properties, Mezzanine Assets and Encumbered Properties, as the case may be, or any part thereof at reasonable hours upon reasonable advance notice accompanied by a representative of Borrower (if so elected by Borrower), subject to the rights of tenants and parties under any applicable reciprocal easement agreement.

5.1.5        Notice of Default.

Borrower shall promptly advise Lender of any material adverse change in any Key Entity’s condition, financial or otherwise.

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5.1.6        Cooperate in Legal Proceedings.

Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way materially adversely affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.

5.1.7        Award and Insurance Benefits.

Upon Lender’s reasonable request, Borrower shall cooperate, and cause each Property Guarantor to cooperate, with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with any Individual Property, and Lender shall be reimbursed for any out-of-pocket expenses incurred in connection therewith (including reasonable attorneys’ fees and disbursements, and the payment by Borrower or Property Guarantor of the expense of an appraisal on behalf of Lender in case of Casualty or Condemnation affecting any Individual Property or any part thereof) out of such Award or Insurance Proceeds.

5.1.8        Further Assurances.

Borrower shall, and shall cause each Property Guarantor and Mezzanine Subsidiary, at Borrower’s sole cost and expense, to:

(a)           furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower or Property Guarantor pursuant to the terms of the Loan Documents;

(b)           execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require including, without limitation, the authorization of Lender to execute or file and/or the execution or filing by Borrower, Mezzanine Subsidiary or Property Guarantor of UCC financing statements and the execution and delivery of all such writings necessary to transfer any liquor licenses into the name of Lender or its designee after the occurrence and during the continuance of any Event of Default; and

(c)           do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time provided the same is consistent with the intent of the Loan Documents and creates no new obligations on, or liability to, Borrower or Property Guarantor or Mezzanine Subsidiary other than as intended pursuant to the Loan Documents or otherwise to a de minimis extent.

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5.1.9        Mortgage and Intangible Taxes.

Borrower shall pay or cause to be paid all State, county and municipal recording, mortgage, intangible, and all other taxes imposed upon the execution and recordation of the Security Instruments and/or upon the execution and delivery of the Note, the Guaranty and the Pledge Agreement.

5.1.10      Financial Reporting.

So long as the Debt shall remain unpaid or unsatisfied, Borrower shall:

(a)      deliver to Lender, in form and detail satisfactory to Lender:

(i)       as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Trust, a consolidated balance sheet of the Trust as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Lender, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit and such consolidating statements to be certified by a Responsible Officer of the Trust to the effect that such consolidated statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Trust;

(ii)      as soon as available, but in any event within forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Trust, a consolidated balance sheet of the Trust as at the end of such fiscal quarter, and the related consolidated statements of income or operations and cash flows for such fiscal quarter and for the portion of the Trust’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by a Responsible Officer of the Trust as fairly presenting the financial condition, results of operations and cash flows of the companies in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes and such consolidating statements to be certified by a Responsible Officer of the Trust to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Trust; and

(iii)     Borrower will furnish, or cause to be furnished, to Lender on or before forty-five (45) days after the end of each calendar quarter the following

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items, accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and complete and fairly present results of the operations of Property Guarantors and Mezzanine Asset Owners and the Individual Properties and the Mezzanine Assets (subject to normal year-end adjustments): (i) a rent roll and sales reports from retail tenants for the subject quarter, as applicable, accompanied by an Officer’s Certificate with respect thereto and (ii) quarterly and year-to-date operating statements prepared for each calendar quarter noting net operating income, gross income from operations, and operating expenses, and other information requested by Lender and necessary and sufficient to fairly represent the results of operation of the Properties during such calendar quarter and containing a comparison of budgeted income and expenses and the actual income and expenses, all in form reasonably satisfactory to Lender.

(iv)    Borrower will furnish, or cause to be furnished, to Lender on or before forty-five (45) days after the end of each calendar quarter a listing of all properties directly or indirectly owned by Borrower, any Key Entity and any Encumbered Property Subsidiary certified by a Responsible Officer of Borrower.

(b)           concurrently with the delivery of the financial statements referred to in clause (a)(i), a certificate of its independent certified public accountants certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default under the financial covenants set forth herein or, if any such Default shall exist, stating the nature and status of such event;

(c)           concurrently with the delivery of the financial statements referred to in clause (a), a duly completed Compliance Certificate certifying Borrower’s compliance with the covenants set forth in Sections 5.3 and 5.4 accompanied by all calculations necessary to make such compliance certifications;

(d)           promptly after any request by Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Trust by independent accountants in connection with the accounts or books of the companies, or any audit of any of them;

(e)           promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Trust or Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Trust or Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934; and

(f)            promptly, such additional information regarding the business, financial or corporate affairs of the companies, or compliance with the terms of the Loan Documents, as Lender may from time to time reasonably request.

5.1.11      Business and Operations.

Borrower and Key Entity will continue in all material respects to engage in the businesses presently conducted by it as and to the extent the same are necessary for the

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ownership, maintenance, management and operation of the Properties, the Mezzanine Assets and the Encumbered Properties.  Borrower shall cause each Key Entity to remain in good standing under the laws of each jurisdiction to the extent required to continue to conduct its business as the same is conducted on the date hereof, except to the extent the failure to do so would not reasonably be expected to have a material adverse affect on the financial condition or business of such Key Entity or the condition or ownership of any Individual Property, Mezzanine Asset or Encumbered Property.  Borrower shall cause each Individual Property and Mezzanine Asset to be in compliance with Applicable Laws except to the extent the failure to do so would not be reasonably likely to have a Material Adverse Effect.

5.1.12      Costs of Enforcement.

In the event (a) that the Security Instrument encumbering the Property is foreclosed in whole or in part or that the Security Instrument is, following the occurrence of an Event of Default, put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage prior to or subsequent to the Security Instrument encumbering the Property in which proceeding Lender is made a party, (c) that the Pledge Agreement encumbering the Mezzanine Collateral is foreclosed in whole or in part or the subject of a UCC Sale or that the Pledge Agreement is, following the occurrence of an Event of Default, put into the hands of an attorney for collection, suit, action or foreclosure or (d) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of any Key Entity or an assignment by a Key Entity for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys’ fees and costs, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post judgment action involved therein, together with all required service or use taxes.

5.1.13      Estoppel Statement.

(a)           After request by Lender, Borrower shall within ten (10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Applicable Interest Rate of the Note, (iv) the date installments of interest and/or principal were last paid, (v) to the best of Borrower’s knowledge, any offsets or defenses to the payment of the Debt, and (vi) that the Note, this Agreement, the Security Instruments and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.

(b)           After request by Borrower, Lender shall within ten (10) Business Days furnish Borrower with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Applicable Interest Rate of the Note, (iv) the date installments of interest and/or principal were last paid and (iv) that the Note, this Agreement, the Security Instrument have not been modified or if modified, giving particulars of such modification.

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5.1.14      Loan Proceeds.

Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section ‎2.1.4 and Section 2.1.5.

5.1.15      Performance by Borrower.

Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision of each Loan Document executed and delivered by, or applicable to, Borrower.

5.1.16      Leasing Matters.

(a)           Prior to execution of any Leases of space in the Improvements after the date hereof, Borrower shall submit to Lender, for Lender’s prior approval, which approval shall not be unreasonably withheld, a copy of the form Lease each Property Guarantor plans to use in leasing space in the Improvements or at any Individual Property.  All such Leases of space in the Improvements or at any Individual Property shall be on terms consistent with the terms for similar leases in the market area of the Property, shall provide for market rents then prevailing in the market area of the applicable Individual Property or Mezzanine Asset and with respect to a substantial portion of such Leases, shall be for a term of not less than six (6) months or greater than one (1) year.  Borrower shall also submit to Lender for Lender’s approval, which approval shall not be unreasonably withheld, prior to the execution thereof, any proposed Lease of the Improvements or any portion thereof that differs materially and adversely from the aforementioned form Lease.  Borrower shall not permit and Property Guarantor nor any Mezzanine Asset Owner to execute any Lease for all or a substantial portion of any Individual Property or Mezzanine Asset, except for an actual occupancy by the tenant, lessee or licensee thereunder, and shall at all times promptly and faithfully perform, or cause to be performed, all of the covenants, conditions and agreements contained in all Leases with respect to any Individual Property or Mezzanine Asset, now or hereafter existing, on the part of the landlord, lessor or licensor thereunder to be kept and performed.  Borrower shall furnish to Lender, within ten (10) days after a request by Lender to do so, but in any event by January 1 of each year, a current Rent Roll, certified by the applicable Property Guarantor or Mezzanine Asset Owner as being true and correct, containing the names of all Tenants with respect to each Individual Property and Mezzanine Asset, respectively, the terms of their respective Leases, the spaces occupied and the rentals or fees payable thereunder and the amount of each Tenant’s security deposit.  Upon the request of Lender, Borrower shall cause each Property Guarantor and Mezzanine Asset Owner to deliver to Lender a copy of each such Lease.  Borrower shall not do or suffer to be done, nor permit any Property Guarantor or Mezzanine Asset owner to do or suffer to be done, any act, or omit to take any action, that might result in a default by the landlord, lessor or licensor under any such Lease or allow the tenant thereunder to withhold payment of rent or cancel or terminate same and shall not further assign any such Lease or any such Rents.  Borrower shall cause each Property Guarantor and Mezzanine Asset Owner, at no cost or expense to Lender, shall enforce, short of termination, the performance and observance of each and every

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material condition and covenant of each of the parties under such Leases and no Property Guarantor nor Mezzanine Asset Owner shall anticipate, discount, release, waive, compromise or otherwise discharge any rent payable under any of the Leases except in the normal course of business in a manner which is consistent with sound and customary leasing and management practices for similar properties in the community in which the applicable Individual Property or Mezzanine Asset is located.  Notwithstanding the foregoing, at any time and from time to time, Lender shall be entitled to, and Borrower shall cause each Property Guarantor and Mezzanine Asset Owner to grant the Lender the right to, undertake any and all action as may be required (in the sole discretion of Lender) to cure any default, or event which with the passage of time following any notice and cure period shall constitute a default by Property Guarantor or Mezzanine Asset Owner, as the case may be, under such Leases.  No Property Guarantor or Mezzanine Asset Owner shall, without the prior written consent of Lender, modify any of the Leases, terminate or accept the surrender of any Leases, waive or release any other party from the performance or observance of any obligation or condition under such Leases except in the normal course of business in a manner which is consistent with sound and customary leasing and management practices for similar properties in the community in which the applicable Individual Property or Mezzanine Asset is located.

5.1.17      Management Agreement.

(a)           The Properties and Mezzanine Assets are operated under the terms and conditions of the Management Agreements.  In no event shall the management fees under any Management Agreement (but excluding construction, leasing and ancillary fees) exceed 4% of the gross income derived from the applicable Individual Property or Mezzanine Asset.  Borrower shall cause each Property Guarantor and each Mezzanine Asset Owner to (i) diligently perform and observe all of the material terms, covenants and conditions of the Management Agreements, on the part of Property Guarantor or Mezzanine Asset Owner, as the case may be, to be performed and observed to the end that all things shall be done which are necessary to keep unimpaired the rights of Property Guarantor or Mezzanine Asset Owner, under the Management Agreements and (ii) promptly notify Lender of the giving of any notice by Manager to Property Guarantor or any Mezzanine Asset Owner of any default beyond any applicable notice and cure period by Borrower in the performance or observance of any of the terms, covenants or conditions of any Management Agreement on the part of Property Guarantor or Mezzanine Asset Owner to be performed and observed and deliver to Lender a true copy of each such notice.  No Property Guarantor nor Mezzanine Asset Owner shall surrender any Management Agreement, consent to the assignment by the Manager of its interest under the applicable Management Agreement, or terminate or cancel any Management Agreement, or modify, change, supplement, alter or amend any Management Agreement, in any material respect, either orally or in writing.  If Property Guarantor or any Mezzanine Asset Owner shall default in the performance or observance of any material term, covenant or condition of any Management Agreement on the part of Property Guarantor or such Mezzanine Asset Owner to be performed or observed, then, without limiting the generality of the other provisions of this Agreement, Lender shall have the right, but shall be under no obligation, to pay any

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sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of any Management Agreement on the part of Property Guarantor or Mezzanine Asset Owner to be performed or observed to be promptly performed or observed on behalf of Property Guarantor or Mezzanine Asset Owner, as the case may be, to the end that the rights of Property Guarantor or Mezzanine Asset Owner, as the case may be, in, to and under the Management Agreements shall be kept unimpaired and free from default.  Lender and any Person designated by Lender shall have, and are hereby granted, upon reasonable prior notice to Property Guarantor and Mezzanine Asset Owner and subject to the rights of tenants, the right to enter upon the applicable Individual Property or Mezzanine Asset at any time and from time to time for the purpose of taking any such action.  If the Manager shall deliver to Lender a copy of any notice sent to Property Guarantor or Mezzanine Asset Owner of default under any Management Agreement, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender in good faith, in reliance thereon.  Except as expressly provided in the Management Agreements, neither Property Guarantor nor Mezzanine Asset Owner shall, and shall not permit the Manager to, sub-contract any or all of its management responsibilities under any Management Agreement to a third-party without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed.  Borrower shall cause Property Guarantor and Mezzanine Asset Owner to, from time to time, obtain from the Manager such certificates of estoppel with respect to compliance by Property Guarantor and Mezzanine Asset Owner with the terms of the applicable Management Agreement as may be reasonably requested by Lender.  Any sums expended by Lender pursuant to this paragraph (i) shall bear interest at the Default Rate from the date such cost is incurred to the date of payment to Lender, (ii) shall be deemed to constitute a portion of the Debt, (iii) shall be secured by the lien of the Pledge Agreement and Security Instruments and the other Loan Documents and (iv) shall be immediately due and payable upon demand by Lender therefor.

(b)           Without limitation of the foregoing, Borrower shall cause Property Guarantor and Mezzanine Asset Owner, upon the request of Lender, to terminate any or all of the Management Agreements and replace the Manager, without penalty or fee, if at any time during the Loan: (a) any Manager shall become insolvent or a debtor in any bankruptcy or insolvency proceeding, (b) there exists an uncured Event of Default or (c) there exists a material event of default beyond any applicable notice and cure period by Manager under any Management Agreement.  At such time as the Manager may be removed, a Qualified Manager shall assume management of the applicable Individual Property pursuant to a Replacement Management Agreement.

(c)           Notwithstanding the foregoing, Borrower may permit Property Guarantor and Mezzanine Asset Owner to terminate any Management Agreement in accordance with its terms and appoint a successor Manager upon thirty (30) days prior written notice to Lender, provided (i) that the successor Manager is a Qualified Manager and (ii) Property Guarantor or Mezzanine Asset Owner, as the case may be, and the successor Manager enter into a Replacement Management Agreement.

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5.1.18      Environmental Covenants.

(a)           Borrower covenants and agrees that so long as the Loan is outstanding (i) all uses and operations on or of the Properties, whether by any Key Entity or any other Person, shall be in compliance in all material respects with all Environmental Laws and permits issued pursuant thereto; (ii) there shall be no Releases of Hazardous Materials in, on, under or from any of the Properties, Mezzanine Assets or Encumbered Properties except in compliance in all respects with all Environmental Laws; (iii) there shall be no Hazardous Materials in, on, or under any of the Properties, Mezzanine Assets or Encumbered Properties, except those that are both (A) in compliance with all Environmental Laws and with permits issued pursuant thereto, if and to the extent required, and (B) (1) in amounts not in excess of that necessary to operate, clean, repair or maintain the applicable Individual Property, Mezzanine Asset or Encumbered Property or (2) used in the conduct of business of a tenant or a product sold to the public pursuant to the operations of such tenant’s business; (iv) Borrower shall keep, or cause to be kept, the Properties, Mezzanine Assets or Encumbered Properties free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of any Key Entity or any other Person (the “Environmental Liens”); (v) Borrower shall, and shall cause each Key Entity to, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to paragraph (b) below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (vi) Borrower shall, and shall cause each Key Entity to, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Properties, Mezzanine Assets or Encumbered Properties, pursuant to any reasonable written request of Lender, upon Lender’s reasonable belief that an Individual Property, Mezzanine Asset or Encumbered Property is not in full compliance with all Environmental Laws, and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (vii) Borrower shall, and shall cause each Key Entity to, at its sole cost and expense, comply with all reasonable written requests of Lender to (A) reasonably effectuate remediation of any Hazardous Materials in, on, under or from any Individual Property, Mezzanine Asset or Encumbered Property; for which remediation is required pursuant to Environmental Law and (B) comply with any Environmental Law; (viii) neither Borrower nor any Key Entity shall allow any tenant or other user of any of the Properties, Mezzanine Assets or Encumbered Properties to violate any Environmental Law; and (ix) Borrower shall, and shall cause each Key Entity to, immediately notify Lender in writing after it has become aware of (A) any presence or Release or threatened Releases of Hazardous Materials in, on, under, from or migrating towards any of the Properties, Mezzanine Assets or Encumbered Properties; (B) any non compliance with any applicable Environmental Laws related in any way to any of the Properties, Mezzanine Assets or Encumbered Properties; (C) any actual or potential Environmental Lien; (D) any required or proposed remediation of environmental conditions relating to any of the Properties, Mezzanine Assets or Encumbered Properties; and (E) any written or oral notice or other communication of which Borrower or any Key Entity becomes aware from any source whatsoever (including but

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not limited to a Governmental Authority) relating in any way to Hazardous Materials in connection with the Properties, Mezzanine Assets or Encumbered Properties.

(b)           Upon Lender’s reasonable belief that any Individual Property, Mezzanine Asset or Encumbered Property does not comply with Environmental Laws, Lender and any other Person designated by Lender, including but not limited to any representative of a Governmental Authority, and any environmental consultant, and any receiver appointed by any court of competent jurisdiction, shall have the right, but not the obligation, to enter upon any Properties, Mezzanine Assets or Encumbered Properties at all reasonable times and after reasonable notice to Borrower or the applicable Key Entity, subject to the rights of tenants, to assess any and all aspects of the environmental condition of any Individual Property, Mezzanine Asset or Encumbered Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender’s sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing.  Borrower shall cooperate, and shall cause each Key Entity to cooperate, with and provide access to Lender and any such Person designated by Lender.

5.1.19      Alterations.

Borrower shall cause Property Guarantor and Mezzanine Asset Owner to obtain Lender’s prior written consent to any alterations to any improvements at any Individual Property or Mezzanine Asset, which consent shall not be unreasonably withheld, conditioned or delayed except with respect to alterations that may have a material adverse effect on Borrower’s, Property Guarantor’s or Mezzanine Asset Owner’s consolidated financial condition or the value of the related Individual Property or Mezzanine Asset.  Notwithstanding the foregoing, Lender’s consent shall not be required in connection with any alterations for any Individual Property or Mezzanine Asset that (A) (i) do not adversely affect the base building, core, shell or the structural integrity of any improvements thereon, or (ii) would not have a material adverse effect on the Individual Property or Mezzanine Asset or (iii) cost less than $50,000 or (B) relate to the performance of tenant improvements on the Property required pursuant to the terms of any Lease otherwise approved by Lender.

5.1.20      OFAC.

At all times throughout the term of the Loan, Borrower, Guarantor and their respective Affiliates shall be in full compliance with all applicable orders, rules, regulations and recommendations of The Office of Foreign Assets Control of the U.S. Department of the Treasury.

5.1.21      O&M Program.

Borrower shall cause each Property Guarantor and Mezzanine Asset Owner to covenant and agree to implement and follow the terms and conditions of any O&M Program for each applicable Individual Property or Mezzanine Asset during the term of the Loan, including any extension or renewal thereof.  Lender’s requirement that Borrower shall cause Property

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Guarantor and Mezzanine Asset Owner to comply with the O&M Program shall not be deemed to constitute a waiver or modification of any of Borrower’s covenants and agreements with respect to Hazardous Materials or Environmental Laws.

5.1.22      Covenants with Respect to Encumbered Properties and Encumbered Property Subsidiaries.

Borrower hereby covenants for the benefit of Lender to cause each Encumbered Property and each Encumbered Property Subsidiary, as the case may be, to comply with the covenants set forth in this Section 5.1 as if such covenants were specified to apply to each Encumbered Property and/or Encumbered Property Subsidiary, as the case may be, except to the extent that any such failure of the Borrower to cause such covenant compliance by an Encumbered Property and/or Encumbered Property Subsidiary would not have a Material Adverse Effect.

Section 5.2             Negative Covenants.

From the date hereof until payment and performance in full of all Obligations of Borrower under the Loan Documents, Borrower covenants and agrees with Lender that it will not do, directly or indirectly, any of the following:

5.2.1        Liens.

Subject to Borrower’s right to contest such Liens in the same manner relating to Taxes set forth in Section 5.1.2, Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of any Individual Property or any Mezzanine Asset or permit any such action to be taken, except for Permitted Encumbrances.

5.2.2        Dissolution.

Borrower shall not (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) transfer, lease or sell, in one transaction or any combination of transactions, the assets or all or substantially all of the assets of Borrower, (c) except as expressly permitted under the Loan Documents, modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction in any material respect or (d) cause any Key Entity to (i) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which the Key Entity would be dissolved, wound up or liquidated in whole or in part, or (ii) except as expressly permitted under the Loan Documents, amend, modify, waive or terminate the certificate of incorporation, bylaws or similar organizational documents of the Key Entity, in each case, without obtaining the prior written consent of Lender.

5.2.3        Change In Business.

Borrower shall not enter into any line of business other than its current business (including providing services in connection therewith), or make any material change in the scope or nature of its business objectives, purposes or operations or undertake or participate in activities other than the continuance of its present business to the extent it would reasonably be

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expected to have a material adverse affect on the financial condition or business of Borrower.  Borrower shall not permit any Key Entity  to enter into any line of business other than its current business (including providing services in connection therewith), or make any material change in the scope or nature of its business objectives, purposes or operations or undertake or participate in activities other than the continuance of its present business to the extent it would reasonably be expected to have a material adverse affect on the financial condition or business of such Key Entity or the condition or ownership of any Individual Property or Mezzanine Asset.

5.2.4        Debt Cancellation.

Borrower shall not cancel or otherwise forgive or release any material claim or debt (other than termination of Leases in accordance herewith or the settlement of a dispute with a provider of materials or services in the ordinary course of Borrower’s business) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.  Borrower shall not permit any Key Entity to cancel or otherwise forgive or release any material claim or debt (other than termination of Leases in accordance herewith or the settlement of a dispute with a provider of materials or services in the ordinary course of such Key Entity’s business) owed to such Key Entity by any Person, except for adequate consideration and in the ordinary course of such Key Entity’s business.

5.2.5        Zoning.

No Key Entity shall initiate or consent to any zoning reclassification of any portion of any Individual Property or Mezzanine Asset or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Individual Property or Mezzanine Asset in any manner that could reasonably be expected to result in the current use becoming a non conforming use under any applicable zoning ordinance or any other Applicable Law without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed.

5.2.6        No Joint Assessment.

Borrower shall not, nor permit any Property Guarantor or Mezzanine Asset Owner to, suffer, permit or initiate the joint assessment of any Individual Property or Mezzanine Asset with (a) any other real property constituting a tax lot separate from such Individual Property or Mezzanine Asset, or (b) any portion of such Individual Property or Mezzanine Asset which may be deemed to constitute personal property, or any other procedure whereby the Lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such Individual Property or Mezzanine Asset.

5.2.7        Name, Identity, Structure, or Principal Place of Business.

Borrower shall not change its name, identity (including its trade name or names), or  principal place of business set forth in the introductory paragraph of this Agreement, without, in each case, first giving Lender thirty (30) days prior written notice.  Borrower shall not permit any Property Guarantor or Mezzanine Subsidiary to change its name, identity (including its trade name or names), or  principal place of business from that which exists on the date hereof, without, in each case, first giving Lender thirty (30) days prior written notice.  Borrower shall

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not change its corporate, partnership or other structure (except as expressly permitted in Section 5.2.10), or the place of its organization as set forth in Section ‎4.1.34, without, in each case, the consent of Lender.  Borrower shall not permit any Property Guarantor or Mezzanine Subsidiary or Mezzanine Asset Owner to change its corporate, partnership or other structure, or the place of its organization, without, in each case, the consent of Lender. Upon Lender’s request, Borrower shall execute and deliver, and cause each Property Guarantor and Mezzanine Subsidiary to deliver, additional financing statements, security agreements and other instruments which may be necessary to effectively evidence or perfect Lender’s security interest in the Property or Mezzanine Collateral as a result of such change of principal place of business or place of organization.

5.2.8        ERISA.

(a)           During the term of the Loan or of any obligation or right hereunder, Borrower shall not be a Plan and none of the assets of Borrower shall constitute Plan Assets.

(b)           Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as reasonably requested by Lender represents and covenants that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (B) Borrower is not subject to State statutes regulating investments and fiduciary obligations with respect to governmental plans; and (C) one or more of the following circumstances is true:

(i)       Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3 101(b)(2);

(ii)      Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3 101(f)(2); or

(iii)     Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3 101(c) or (e).

5.2.9        Affiliate Transactions.

Borrower shall not enter into, or be a party to, any transaction with an Affiliate of Borrower except in the ordinary course of business and on terms which are fully disclosed to Lender in advance and are no less favorable to Borrower or such Affiliate than would be obtained in a comparable arm’s-length transaction with an unrelated third-party.

5.2.10      Transfers.

(a)           Borrower shall not (i) cause or permit Property Guarantor nor any Mezzanine Asset Owner to sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or

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indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) any Individual Property or any Mezzanine Asset or any part thereof or any legal or beneficial interest therein or (ii) cause or permit a Sale or Pledge of an interest in any Restricted Party other than interest in the Trust (collectively, a “Transfer”), other than pursuant to Leases of space in the Improvements to tenants in accordance with the provisions of Section ‎5.1.16 hereof.

(b)           A Transfer shall include, but not be limited to: (i) an installment sales agreement wherein Property Guarantor or any Mezzanine Asset Owner agrees to sell one or more Individual Properties or Mezzanine Assets or any part thereof for a price to be paid in installments; (ii) an agreement by any Property Guarantor or any Mezzanine Asset Owner leasing all or a substantial part of any Individual Property or Mezzanine Asset for other than actual occupancy by a tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Property Guarantor’s or Mezzanine Asset Owner’s right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general partner or limited partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interests or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests; (vi) if a Restricted Party is a trust or nominee trust (other than the Trust), any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal or the resignation of the Manager (including, without limitation, an Affiliated Manager) other than in accordance with Section ‎5.1.17 hereof.

(c)           Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon a Transfer in violation of this Section 5.2.10.  This provision shall apply to every Transfer (other than a taking by eminent domain) regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.

(d)           Borrower may permit Property Guarantor or Mezzanine Asset Owner, with Lender’s consent, which consent shall not be unreasonably withheld, grant easements, restrictions, covenants, reservations and rights of way in the ordinary course of business for access, water and sewer lines, telephone and telegraph lines, electric lines or other utilities or for other similar purposes or other purposes (which may

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include amendments to existing reciprocal easement agreements) reasonably approved by Lender, provided that no such encumbrance or amendment set forth in this clause (d) shall materially impair the utility, operation and use of the applicable Individual Property or Mezzanine Asset or otherwise have a material adverse effect on the applicable Individual Property or Mezzanine Asset.  In connection with any such grant permitted pursuant to this Section 5.2.10(d), Lender shall execute and deliver any instrument reasonably necessary or appropriate to subordinate the Lien of the Security Instrument to such easements, restrictions, covenants, reservations and rights of way or other similar grants upon receipt by Lender of: (a) fifteen (15) days prior written notice thereof; (b) a copy of the instrument or instruments of such grant; (c) an Officer’s Certificate stating that such grant does not materially impair the utility, operation and use of the Individual Property or Mezzanine Asset or have a material adverse effect on the consolidated financial condition or business of Borrower or Property Guarantor’s or Mezzanine Asset Owner’s or the condition or ownership of the Individual Property or Mezzanine Asset, as the case may be; and (d) reimbursement of all of Lender’s reasonable out-of-pocket costs and expenses incurred in connection with such grant.

5.2.11      Limitation on Distributions.

From and after the occurrence of an Event of Default specified in Section 8.1(a)(i), (a)(vi) or (a)(vii), Borrower shall not make any distributions of any nature.

5.2.12      Negative Covenants with Respect to Encumbered Properties and Encumbered Property Subsidiaries.

Borrower hereby covenants for the benefit of Lender to cause each Encumbered Property and each Encumbered Property Subsidiary, as the case may be, to comply with the covenants set forth in this Section 5.2 as if such covenants were specified to apply to each Encumbered Property and/or Encumbered Property Subsidiary, as the case may be, except to the extent that any such failure of the Borrower to cause such covenant compliance by an Encumbered Property and/or Encumbered Property Subsidiary would not have a Material Adverse Effect.

Section 5.3             Financial and REIT Status Covenants.

(a)           Borrower shall maintain at all times a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00.  The Fixed Charge Coverage Ratio shall be calculated as the quotient of (i) the trailing twelve-month net operating income at owned Student Housing Projects net of a management fee representing 3% of aggregate student housing revenue and a turnover expense of the greater of (A) $125 per bed or (B) actual turnover expenses incurred per bed, less a capital reserve of $125 per bed in aggregate, and (ii) the sum of Consolidated Interest Charges (excluding unamortized upfront fees that shall be recorded in respect to the Credit Agreement and upfront fees that shall be recorded pertaining to the Loan), principal amortization and preferred dividends of the Borrower and any of its Subsidiary entities, as calculated over the same time period. For any property owned less than one (1) year the turnover expenses and capital reserve

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calculation will be prorated for the number of days the property has been owned by the Borrower or its Subsidiary.

(b)           Borrower shall not permit Consolidated Tangible Net Worth to be less than $455,000,000.

(c)           Borrower shall maintain a quarterly minimum aggregate Adjusted Management EBITDA of $5,000,000.

(d)           At all times, the Trust (including its organization and method of operations and those of its subsidiaries) shall qualify as a REIT.

All calculations of financial covenants shall be in accordance with GAAP and shall be reported quarterly.

Section 5.4             Limitation on Indebtedness. Borrower and its Subsidiaries shall not create, incur, assume or suffer to exist any Indebtedness or issue any shares or interests of preferred Capital Stock, except:

(a)           Indebtedness of the Borrower and the Guarantors under this Agreement and the other Loan Documents;

(b)           Indebtedness of any Guarantor to the Borrower;

(c)           Indebtedness of an entity which becomes a Subsidiary after the date hereof, provided that (i) such Indebtedness existed at the time such entity became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such corporation by the Borrower no Default or Event of Default shall have occurred and be continuing;

(d)           Indebtedness relating to future property acquisitions or refinancings or equity commitments as may be budgeted on a Lender approved basis;

(e)           Indebtedness relating to financings or refinancings relating to Military Housing Projects that are non-recourse to Borrower or its Subsidiaries and subject only to customary “bad acts” guarantees provided in connection with such projects;

(f)            Indebtedness existing as of the date hereof relating to Student Housing Projects;

(g)           Indebtedness relating to existing equity commitments related to Military Housing Projects none of which will become payable prior to payment in full of the Obligations; and

(h)           Indebtedness relating to acquisitions and financings  (including amounts) and equity commitments (including amounts) specified on  the Sources and Uses attached hereto as Schedule E.

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ARTICLE VI

INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS

Section 6.1             Insurance.

(a)          Borrower shall obtain and maintain, or cause to be maintained, Policies for Borrower, each Property Guarantor and each Individual Property (individually or collectively, as the context requires, an “Insured Asset”) providing at least the following coverages:

(i)            comprehensive all risk insurance on the Improvements and the Personal Property, in each case (A) in an amount equal to 100% of the “Full Replacement Cost,” which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation, (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of $50,000; and (D) providing coverage for contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements together with an “Ordinance or Law Coverage” or “Enforcement” endorsement if any of the Improvements or the use of each Insured Asset shall at any time constitute legal non-conforming structures or uses;

(ii)           commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about each Insured Asset, such insurance (A) to be on the so-called “occurrence” form with a general aggregate limit of not less than $2,000,000 and a per occurrence limit of not less than $1,000,000; (B) to continue at not less than the aforesaid limit; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an “if any” basis; (3) independent contractors; (4) blanket contractual liability for all written and oral contracts; and (5) contractual liability covering the indemnities contained in Article 10 of the Security Instruments to the extent the same is available;

(iii)          business interruption/loss of rents insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in ‎Section 6.1(a)(i); (C) in an amount equal to 100% of the projected gross income from each Insured Asset (on an actual loss sustained basis) for a period continuing until the Restoration of the Insured Asset is completed; the amount of such business interruption/loss of rents insurance shall be determined prior to the Closing Date and at least once each year thereafter based on Borrower’s, Property Guarantor’s or Mezzanine Asset Owner’s, as the case may be, reasonable estimate of the gross income from each Insured Asset for the full calendar year prior to the date the amount of such insurance is being determined, in each case for the succeeding eighteen (18) month period and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the

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improvements and the Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that the applicable Insured Asset is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; subject to the rights of any mortgage lender on a Mezzanine Asset, all insurance proceeds payable to Lender pursuant to this ‎Section 6.1(a)(iii) shall be held by Lender and shall be applied to the obligations secured hereunder from time to time due and payable hereunder and under the Note and this Agreement.  Nothing herein contained, however, shall be deemed to relieve Borrower of its obligations to pay the obligations secured hereunder on the respective dates of payment provided for in the Note and this Agreement except to the extent such amounts are actually paid out of the proceeds of such business interruption/loss of rents insurance.

(iv)          at all times during which structural construction, repairs or alterations are being made with respect to the improvements: (A) owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the insurance provided for in ‎Section 6.1(c)(ii); and (B) the insurance provided for in ‎Section 6.1(a)(i) shall be written in a so-called builder’s risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to ‎Section 6.1(a)(i), (3) shall include permission to occupy each Insured Asset, and (4) shall contain an agreed amount endorsement waiving co-insurance provisions;

(v)           workers’ compensation, subject to the statutory limits of the State in which each Insured Asset is located, and employer’s liability insurance with a limit of at least $1,000,000.00 per accident and per disease per employee, and $1,000,000.00 for disease aggregate in respect of any work or operations on or about each Insured Asset, or in connection with such Insured Asset or its operation (if applicable);

(vi)          comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under ‎Section 6.1(a)(i);

(vii)         if any portion of the improvements is at any time located in an area identified by the Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended, or any successor law (the “Flood Insurance Acts”), flood hazard insurance of the following types and in the following amounts (A) coverage under Policies issued pursuant to the Flood Insurance Acts (the “Flood Insurance Policies”) in an amount equal to the maximum limit of coverage available for the applicable Insured Asset under the Flood Insurance Acts, subject only to customary deductibles under such Policies and (B) coverage under supplemental private Policies in an amount, which when

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added to the coverage provided under the Flood Act Policies with respect to an Insured Asset, is not less than the Allocated Value for such Insured Asset;

(viii)        if required by Lender, earthquake, sinkhole and mine subsidence insurance in amounts equal to the probable maximum loss of each Insured Asset as determined by Lender in its sole discretion and in form and substance reasonably satisfactory to Lender, provided that the insurance pursuant to this ‎Section 6.1(a)(viii) hereof shall be on terms consistent with the all risk insurance policy required under ‎Section 6.1(a)(i) hereof;

(ix)          umbrella liability insurance in an amount not less than Seventy-Five Million and 00/100 Dollars ($75,000,000.00) per occurrence on terms consistent with the commercial general liability insurance policy required under ‎Section 6.1(a)(ii) hereof;

(x)           insurance against damage resulting from acts of terrorism on terms consistent with the commercial property insurance policy required under subsection (i) above and on terms consistent with the commercial general liability insurance required under subsection (ii) above;

(xi)          such other insurance and in such amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to each Insured Asset located in or around the region in which the each Insured Asset is located.

(b)           All insurance provided for in Section 6.1(a) hereof shall be obtained under valid and enforceable policies (the “Policies” or in the singular, the “Policy”), in such forms as may be reasonably satisfactory to Lender, issued by financially sound and responsible insurance companies authorized to do business in the State in which the Insured Asset is located and approved by Lender.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of “BBB” or better by S&P and its equivalent from each of the other Rating Agencies and/or a general policy rating of “A” or better and a financial class of VIII or better by A.M. Best Company, Inc.  The Policies described in Section 6.1(a) shall designate Lender and its successors and assigns as additional insureds, mortgagees and/or loss payee as deemed appropriate by Lender. To the extent such Policies are not available as of the Closing Date, Borrower shall deliver to Lender prior to the Closing Date an Accord 28 or similar certificate of insurance evidencing the coverages and amounts required hereunder and, upon request of Lender as soon as available after the Closing Date, certified copies of all Policies.  Borrower shall deliver to Lender within thirty (30) days of the Closing Date, the final Policies required to be maintained pursuant to this Article 8.  Not less than ten (10) days prior to the expiration dates of any insurance coverage in place with respect to the Insured Asset, Borrower shall deliver to Lender an Accord 28 or similar certificate, accompanied by evidence satisfactory to Lender of payment of the premiums due in connection therewith (the “Insurance Premiums”), and as soon as available thereafter, certified copies of all renewal Policies.

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(c)           All Policies provided for in ‎Section 6.1(a) hereof shall contain clauses or endorsements to the effect that:

(i)       no act or negligence of Borrower or anyone acting for Borrower, including Property Guarantor or Mezzanine Asset Owner or failure to comply with the provisions of any Policy which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned;

(ii)      the Policies shall not be materially changed (other than to increase the coverage provided thereby) or cancelled without at least 30 days’ written notice to Lender and any other party named therein as an insured;

(iii)     each Policy shall provide that the issuers thereof shall give written notice to Lender if the Policy has not been renewed thirty (30) days prior to its expiration; and

(iv)    Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.

(d)           Borrower shall furnish or cause to be furnished to Lender, on or before thirty (30) days after the close of each of Borrower’s fiscal years, a statement certified by Borrower or a subsidiary of Borrower or a duly authorized officer of Borrower of the amounts of insurance maintained in compliance herewith, of the risks covered by such insurance and of the insurance company or companies which carry such insurance and, if requested by Lender, verification of the adequacy of such insurance by an independent insurance broker or appraiser acceptable to Lender.

(e)           If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right (subject to the rights of the mortgage lender with respect to the Mezzanine Assets), without notice to Borrower, Property Guarantor or  Mezzanine Asset Owner to obtain such insurance as required pursuant to this Agreement, and all expenses incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and until paid shall be secured by the Pledge Agreement and Security Instruments and shall bear interest at the Default Rate.  Lender agrees to use commercially reasonable efforts to notify Borrower, Property Guarantor or Mezzanine Asset Owner, as the case may be, if it is exercising any rights it may have under this subsection (e), provided, however, any failure to deliver such notice shall in no way affect or impair any rights Lender may have hereunder.

(f)            In the event of a foreclosure of any of the Security Instruments, or other transfer of title to any Insured Asset in extinguishment in whole or in part of the Debt all right, title and interest of Borrower or Property Guarantor in and to the Policies then in force and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title.

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(g)           Borrower shall cause each Mezzanine Asset Owner and Encumbered Property Subsidiary to maintain the insurance required pursuant to the mortgage loan documents encumbering the related Mezzanine Asset and Encumbered Property.

Section 6.2             Casualty.

If an Insured Asset shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt notice or cause prompt notice to be given of such damage to Lender and shall, taking into account the time necessary to adjust the loss, obtain permits and enter into restoration contracts, promptly commence and diligently prosecute the completion of the Restoration of the Insured Asset as nearly as possible to the condition the Insured Asset was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Lender and otherwise in accordance with Section 6.4.  Subject to the Net Proceeds being made available by Lender (or any mortgage lender with respect to the Mezzanine Assets), Borrower shall pay, or cause Property Guarantor or Mezzanine Asset Owner to pay, all costs of such Restoration whether or not such costs are covered by insurance, provided, however, regardless of whether Net Proceeds available for Restoration, Borrower shall cause Property Guarantor and Mezzanine Asset Owner to promptly commence and diligently prosecute the removal and disposal of any debris, refuse or hazards resulting from the Casualty and insure that the applicable Insured Asset is in a safe condition.  Lender may, but shall not be obligated to make proof of loss (subject to the rights of any mortgage lender with respect to the Mezzanine Assets) if not made promptly by Borrower or Property Guarantor or Mezzanine Asset Owner, as the case may be.

Section 6.3             Condemnation.

Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of all or any part of any Insured Asset and shall deliver to Lender copies of any and all papers served in connection with such proceedings.  Lender may participate in any such proceedings, and Borrower, Property Guarantor or Mezzanine Asset Owner, as the case may be, shall from time to time deliver to Lender all instruments reasonably requested by it to permit such participation.  Borrower, Property Guarantor or Mezzanine Asset Owner, as the case may be, shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.  Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award due to Property Guarantor or Mezzanine Asset Owner shall have been actually received and applied by Lender, after the deduction of reasonable out-of-pocket expenses of collection, to the reduction or discharge of the Debt.  Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note.  If any Insured Asset or any portion thereof is taken by a condemning authority, Borrower shall cause Property Guarantor and Mezzanine Asset Owner, as the case may be, to, promptly commence and diligently prosecute the Restoration of the applicable Insured Asset and otherwise comply with the provisions of

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‎Section 6.4.  If any Insured Asset is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note or under the Guaranty shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.

Section 6.4             Restoration.

The following provisions shall apply in connection with the Restoration of any Insured Asset:

(a)           If the Net Proceeds shall be less than $100,000 and the costs of completing the Restoration shall be less than $100,000, the Net Proceeds will be disbursed by Lender to Borrower or Property Guarantor upon receipt, provided that all of the conditions set forth in Section 6.4(b)(i) are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to complete the Restoration in accordance with the terms of this Agreement.

(b)           If the Net Proceeds are equal to or greater than $100,000 or the costs of completing the Restoration is equal to or greater than $100,000 Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 6.4.  The term “Net Proceeds” shall mean:  (i) the net amount of all insurance proceeds received by Lender pursuant to Section 6.1(a)(i), (iv), (vi), (vii), (viii) and (x) as a result of such damage or destruction, after deduction of the reasonable out-of-pocket costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same (“Insurance Proceeds”), or (ii) the net amount of the Award, after deduction of its reasonable out-of-pocket costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same (“Condemnation Proceeds”), whichever the case may be.

(i)       The Net Proceeds shall be made available to Borrower or to Property Guarantor for Restoration provided that each of the following conditions are met:

(A)          no Event of Default shall have occurred and be continuing;

(B)          (1) in the event the Net Proceeds are Insurance Proceeds, less than thirty-five percent (35%) of the total floor area of the Improvements on the Individual Property has been damaged, destroyed or rendered unusable as a result of such Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than fifteen percent (15%) of the land constituting the Individual Property is taken, and such land is located along the perimeter or periphery of the Individual Property, and less than ten percent (10%) of the floor area of the Improvements is the subject of the Condemnation;

(C)          Leases covering in the aggregate at least seventy-five percent (75%) of the total rentable space in the Property which has been demised under executed and delivered Leases in effect as of the date of the

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occurrence of such Casualty or Condemnation, whichever the case may be, is in effect as of such date shall remain in full force and effect during and after the completion of the Restoration without abatement of rent beyond the time required for Restoration;

(D)          Borrower shall cause Property Guarantor to commence the Restoration as soon as reasonably practicable (but in no event later than sixty (60) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion in compliance with all Applicable Laws, including, without limitation, all applicable Environmental Laws.  For purposes of this subsection (D), the filing for an application for a building permit for such Restoration shall be deemed commencement of such Restoration;

(E)           Lender shall be reasonably satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the Individual Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(iii), if applicable, or (3) by other funds of Borrower;

(F)           Lender shall be reasonably satisfied that the Restoration will be completed on or before the earliest to occur of (1) the earliest date required for such completion under the terms of any Leases which are required in accordance with the provisions of this Section 6.4(b) to remain in effect subsequent to the occurrence of such Casualty or Condemnation and the completion of the Restoration, or (2) such time as may be required under Applicable Law in order to repair and restore the Property to the condition it was in immediately prior to such Casualty or Condemnation or (3) the expiration of the insurance coverage referred to in Section 6.1(a)(iii), unless Borrower has posted reasonably acceptable additional collateral with Lender;

(G)           the Individual Property and the use thereof after the Restoration will be in compliance with and permitted under all Applicable Laws;

(H)          such Casualty or Condemnation, as applicable, does not result in the total permanent loss of access to the Individual Property or the related Improvements;

(I)            Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrower’s architect or engineer stating the entire cost of completing the Restoration, which budget shall show that the Restoration can be completed from Net

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Proceeds and Cash or Cash equivalents deposited by Borrower with Lender;

(J)            the Net Proceeds together with any Cash or Cash equivalent deposited by Borrower with Lender are sufficient in Lender’s reasonable discretion to cover the cost of the Restoration; and

(K)          the Management Agreement in effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case may be, shall (1) remain in full force and effect during the Restoration and shall not otherwise terminate as a result of the Casualty or Condemnation or the Restoration or (2) if terminated, shall have been replaced with a Replacement Management Agreement with a Qualified Manager, prior to the opening or reopening of the applicable Individual Property or any portion thereof for business with the public.

(ii)      The Net Proceeds shall be held by Lender in an interest-bearing account (with interest accruing for the benefit of Borrower) and, until disbursed in accordance with the provisions of this ‎Section 6.4(b) shall constitute additional security for the Debt and other obligations under the Loan Documents.  The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower or Property Guarantor from time to time during the course of the Restoration, upon receipt of evidence reasonably satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) to the date of the request in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other Liens or encumbrances of any nature whatsoever on the Individual Property which have not either been fully bonded to the reasonable satisfaction of Lender and discharged of record or in the alternative fully insured to the reasonable satisfaction of Lender by the title company issuing the Title Insurance Policy.

(iii)     All plans and specifications required in connection with the Restoration, shall be subject to prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the “Casualty Consultant”), such review and acceptance shall not be unreasonably withheld, conditioned or delayed.  Lender shall have the use of the plans and specifications and the benefit of all permits, licenses and approvals required or obtained in connection with the Restoration.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration as well as the contracts under which they have been engaged, shall be subject to prior review and acceptance by Lender and the Casualty Consultant, such review and acceptance shall not be unreasonably withheld, conditioned or delayed.  All reasonable costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation,

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reasonable counsel fees and disbursements and the Casualty Consultant’s fees, shall be paid by Borrower or Property Guarantor.

(iv)    In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage.  The term “Casualty Retainage” shall mean an amount equal to ten percent (10%), of the hard costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed.  The Casualty Retainage shall be reduced to five percent (5%) of the hard costs incurred upon receipt by Lender of satisfactory reasonably evidence that fifty percent (50%) of the Restoration has been completed.  The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 6.4(b), be less than the amount actually held back by Borrower or Property Guarantor from contractors, subcontractors and materialmen engaged in the Restoration.  The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been substantially completed in accordance with the provisions of this ‎Section 6.4(b) and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided, however, that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily and substantially completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or materialman delivers the lien waivers (or similar releases) and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company issuing the Title Insurance Policy for the related Individual Property, and Lender receives an endorsement to such Title Insurance Policy insuring the continued priority of the Lien of the related Security Instrument and evidence of payment of any premium payable for such endorsement.  If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman.

(v)     Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.

(vi)    If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender in consultation with the Casualty Consultant, if any, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the Net

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Proceeds shall be made.  The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this ‎Section 6.4(b) shall constitute additional security for the Debt and other obligations under the Loan Documents.

(vii)   The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that the Restoration has been substantially completed in accordance with the provisions of this ‎Section 6.4(b), and the receipt by Lender of evidence reasonably satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents.

(c)           All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to ‎Section 6.4(b)(vii) may be retained and applied by Lender toward the payment of the Debt whether or not then due and payable in such order, priority and proportions as Lender in its sole discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve, in its discretion.  If Lender shall receive and retain Net Proceeds, the Lien of the Security Instruments shall be reduced only by the amount thereof received and retained by Lender and actually applied by Lender in reduction of the Debt in accordance with Section 2.3.2 hereof.

(d)           Borrower shall cause each Mezzanine Asset Owner and Encumbered Property Subsidiary to comply with the restoration requirements set forth in the mortgage loan documents encumbering the related Mezzanine Asset and Encumbered Property.

ARTICLE VII

[RESERVED]

ARTICLE VIII

DEFAULTS

Section 8.1             Event of Default.

(a)           Each of the following events shall constitute an event of default hereunder (an “Event of Default”):

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(i)       if (A) any regularly scheduled payment of interest or principal (including the principal and interest due on the Maturity Date) or any deposit to any reserve account described herein is not paid within three (3) Business Days after the date the same is due and payable or (B) any other portion of the Debt is not paid within five (5) Business Days after demand therefore (or such longer period of time expressly provided for in the Loan Documents);

(ii)      if any of the Taxes are not paid on or before the date the same become delinquent unless Lender determines, in its sole discretion, that such failure to pay Taxes is not likely to have a Material Adverse Effect;

(iii)     if the Policies are not kept in full force and effect or if certified copies of the Policies are not delivered to Lender on request;

(iv)    if any Key Entity or Mezzanine Property Guarantor or any other Person transfers or encumbers any portion of any Individual Property or any Mezzanine Collateral or the direct or indirect interests in any Key Entity, Mezzanine Property Guarantor, Material Subsidiary or Encumbered Property Subsidiary in violation of the provisions of Section ‎5.2.10 hereof;

(v)     if any representation or warranty made by Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect as of the date the representation or warranty was made; provided, however, as to any such false or misleading representation or warranty which was unintentionally submitted to Lender and which can be made true and correct by action of Borrower, Borrower shall have a period of ten (10) Business Days following written notice thereof for Borrower to undertake and complete all action necessary to make such representation, warranty, acknowledgement or statement true and correct as and when made;

(vi)    if any Key Entity or any Guarantor shall make an assignment for the benefit of creditors;

(vii)   if a receiver, liquidator or trustee shall be appointed for any Key Entity or any Guarantor or if any Key Entity or any Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to the Bankruptcy Code, or any similar federal or State law, shall be filed by or against, consented to, or acquiesced in by, any Key Entity or any Guarantor or if any proceeding for the dissolution or liquidation of any Key Entity or any Guarantor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by any Key Entity or any Guarantor upon the same not being discharged, stayed or dismissed within sixty (60) days;

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(viii)  if Borrower attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;

(ix)     if Borrower breaches any of its respective negative covenants contained in ‎Section 5.2;

(x)      if Borrower violates or does not comply with any of the provisions of Section 5.1.18 hereof;

(xi)     if a default by Borrower or Property Guarantor or Mezzanine Asset Owner has occurred and continues beyond any applicable cure period under any Management Agreement (or any Replacement Management Agreement) and the Manager thereunder duly terminates or cancels such Management Agreement (or any related Replacement Management Agreement);

(xii)    if any Property Guarantor or Mezzanine Subsidiary is not a Special Purpose Entity unless Lender determines, in its sole discretion, that such failure to be a Special Purpose Entity is not likely to have a Material Adverse Effect;

(xiii)   if any Individual Property or Mezzanine Asset becomes subject to any mechanic’s, materialman’s or other Lien other than a Lien for local real estate taxes and assessments not then due and payable and the Lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of sixty (60) days after Borrower, Property Guarantor, Mezzanine Asset Owner or Mezzanine Subsidiary obtains notice thereof; provided, however, if any action is brought to enforce such Lien, it shall be an Event of Default if such Lien remains undischarged of record (by payment, bonding or otherwise) for a period of five (5) Business Days after the commencement of such action;

(xiv)   if any federal tax Lien or state or local income tax Lien is filed against any Key Entity or any Guarantor or any Individual Property or Mezzanine Asset and same is not discharged of record (by payment, bonding or otherwise) within sixty (60) days after Borrower obtains notice thereof; provided, however, if any action is brought to enforce such Lien, it shall be an Event of Default if such Lien remains undischarged of record (by payment, bonding or otherwise) for a period of five (5) Business Days after the commencement of such action;

(xv)    (A) Borrower fails to provide Lender with the written certification and evidence required pursuant to Section ‎5.2.8 hereof, (B) Borrower is a Plan or its assets constitute Plan Assets; or (C) Borrower consummates a transaction which would cause the Security Instruments or Lender’s exercise of its rights under the Security Instruments, the Pledge Agreement, the Note, this Agreement or the other Loan Documents to constitute a nonexempt prohibited transaction under ERISA or result in a violation of a State statute regulating governmental plans, subjecting Lender to liability for a violation of ERISA, the Code, a State statute or other similar law;

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(xvi)   if any default occurs under any guaranty or indemnity executed in connection herewith (including, without limitation, the Guaranty and the Environmental Indemnity) and such default continues after the expiration of applicable notice and grace periods, if any;

(xvii)  if any Key Entity shall be in default beyond applicable notice and grace periods under any other mortgage, deed of trust, deed to secure debt or other security agreement covering any part of any Individual Property or any Mezzanine Asset;

(xviii) if there shall occur a default, beyond any applicable notice and cure period, under any Indebtedness of Borrower or its Subsidiaries in excess of $5,000,000;

(xix)   if there shall be default under the Security Instruments, the Pledge Agreement, any Guaranty or any of the other Loan Documents beyond any applicable notice and cure periods contained in such documents;

(xx)    Borrower fails to perform, satisfy or observe any covenant or agreement contained in Section 5.3 or Section 5.4 of this Agreement;

(xxi)   if the Trust (including its organization and method of operations and those of its subsidiaries) shall fail to qualify as a REIT;

(xxii)  if the Trust at any time fails to maintain its current listing on the New York Stock Exchange; or

(xxiii) if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement not specified in subsections (i) to (xx), for ten (10) Business Days after notice to Borrower from Lender, in the case of any Default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other Default; provided, however, that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such 30-day period and provided further that Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed ninety (90) days.

(b)           Upon the occurrence and during the continuance of an Event of Default (other than an Event of Default described in clauses (vi) or (vii) above), in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, Lender may take such action, without notice or demand (except as expressly set forth in this Agreement , that Lender deems advisable to protect and enforce its rights against Borrower and in and to all or any Individual Property or Mezzanine Collateral, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights

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or remedies provided in the Loan Documents against Borrower and any or all of the Properties, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vi) or (vii) above, the Debt and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.

Section 8.2             Remedies.

(a)           If an Event of Default shall occur and be continuing or shall exist, the Lender shall be under no further obligation to make Additional Advances hereunder and may declare the unpaid principal amount of the Note, interest accrued thereon and all other amounts owing by the Borrower or any Guarantor hereunder or under the Note, the Guaranty or the other Loan Documents to be immediately due and payable without presentment, demand, protest or further notice of any kind.  Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding, UCC sale or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any Individual Property, Mezzanine Collateral or any other Collateral.  Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by Applicable Law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by Applicable Law, equity or contract or as set forth herein or in the other Loan Documents.  Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing (i) Lender is not subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Properties and the other Collateral and each Security Instrument and the Pledge Agreement has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full.

(b)           With respect to Borrower and the Properties, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to any Individual Property or Collateral for the satisfaction of any of the Debt in preference or priority to any other Individual Property or Collateral, and Lender may seek satisfaction out of all of the Properties or any other Collateral or any part thereof, in its absolute discretion in respect of the Debt.  In addition, Lender shall have the right from time to time to partially foreclose the Security Instruments in any manner and for any amounts secured by the Security Instruments then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances:  (i) in the

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event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose one or more of the Security Instruments to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose one or more of the Security Instruments to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by one or more of the Security Instruments as Lender may elect.  Notwithstanding one or more partial foreclosures, the Properties shall remain subject to the Security Instruments to secure payment of sums secured by the Security Instruments and not previously recovered.

(c)           Lender shall have the right, from time to time, to sever the Note and the other Loan Documents into one or more separate notes, Security Instruments and other security documents (the “Severed Loan Documents”) in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder.  Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.  Borrower and on behalf of Property Guarantor hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney shall do by virtue thereof; provided, however, Lender shall not make or execute any such documents under such power until ten (10) Business Days after notice has been given to Borrower by Lender of Lender’s intent to exercise its rights under such power.  The Severed Loan Documents shall not contain any representations, warranties or covenants not contained in the Loan Documents and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date.

(d)           In addition to (and without limitation of) any right of setoff, bankers’ lien or counterclaim Lender may otherwise have, Lender shall be entitled, at its option, to offset balances (general or special, time or demand, provisional or final) held by it for the account of Borrower at any of Lender’s offices against any amount payable by Borrower to Lender hereunder or under any other Loan Document which is not paid when due (regardless of whether such balances are then due to Borrower), in which case it shall promptly notify Borrower; provided, however, that Lender’s failure to give such notice shall not affect the validity thereof and further, provided, that the rights of Lender hereunder shall not apply to Excluded Assets (as defined in the Security Agreement).

Section 8.3             Remedies Cumulative; Waivers.

To the extent permitted by Applicable Law, the rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender

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may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient.  A waiver of one or more Defaults or Events of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.

ARTICLE IX

SPECIAL PROVISIONS

Section 9.1             Sale of Notes and Securitization. 

Lender may, at any time, sell, transfer or assign (in each case, in whole or in part) the Note, this Agreement, the Security Instruments and the other Loan Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates or other securities (the “Securities”) evidencing a beneficial interest in a rated or unrated public offering or private placement (including any sale or participations, a “Securitization”).  At the request of the holder of the Note and, to the extent not already required to be provided by Borrower under this Agreement, Borrower shall satisfy the market standards which may be reasonably required in the marketplace or by the Rating Agencies in connection with a Securitization or the sale of the Note or the participations or Securities, including, without limitation, to:

(a)           (i)          provide such financial and other information with respect to the Properties, Borrower, Guarantor and the Manager, (ii) provide budgets relating to the Properties and (iii) upon reasonable prior written notice and at reasonable times, to perform or cause to be performed such site inspection, appraisals, market studies, environmental reviews and reports (Phase I’s and, if appropriate, Phase II’s), engineering reports and other due diligence investigations of the Properties, as may be reasonably requested by the holder of the Note or the Rating Agencies or as may be necessary or appropriate in connection with the Securitization (the “Provided Information”), together, if customary, with appropriate verification and/or consents of the Provided Information through letters of auditors or opinions of counsel of independent attorneys reasonably acceptable to Lender and the Rating Agencies;

(b)           if reasonably required by the Rating Agencies, deliver (i) a nonconsolidation opinion, (ii) revised opinions of counsel as to due execution and enforceability with respect to the Properties, Borrower, Indemnitor, Guarantor, Principal, and their respective Affiliates and the Loan Documents, and (iii) revised organizational documents for Borrower, Guarantor and Principal (including, without limitation, such revisions as are necessary to cause such entity to be a Special Purpose Entity to the extent required hereunder), which counsel, opinions and organizational documents shall be reasonably satisfactory to Lender and the Rating Agencies;

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(c)           if reasonably required by the Rating Agencies, use commercially reasonable efforts to deliver estoppel letters from parties to agreements that affect the Properties, which estoppel letters, subordination agreements or other agreements shall be reasonably satisfactory to Lender and the Rating Agencies.

(d)           execute such amendments to the Loan Documents and organizational documents as may be reasonably requested by the holder of the Note or the Rating Agencies or otherwise to effect the Securitization; provided, however, that Borrower shall not be required to modify or amend any Loan Document if such modification or amendment would (except for modifications and amendments required to be made pursuant to Sections (e) and (f) below) (i) change the interest rate, the stated maturity or the amortization of principal set forth in the Note, or (ii) modify or amend any other economic term of the Loan or (iii) increase the liability or decrease the rights of Borrower under any of the Loan Documents other than to a de minimis extent.

(e)           if Lender elects, in its sole discretion, prior to or upon a Securitization, to split the Loan into two or more parts, or the Note into multiple component notes or tranches which may have different interest rates, amortization payments, principal amounts and maturities, Borrower agrees to reasonably cooperate and cause each Mezzanine Subsidiary to cooperate with Lender in connection with the foregoing and to execute the required modifications and amendments to the Note, this Agreement and the Loan Documents and to provide opinions necessary to effectuate the same.  Such Notes or components may be assigned different interest rates, so long as the initial weighted average of such interest rates does not exceed the Applicable Interest Rate and the other terms and conditions of such component notes are substantially similar to the terms and conditions of the Note, provided that Borrower’s liability or rights under the Loan Documents shall not be increased or decreased, respectively, other than to a de minimis extent;

(f)            upon reasonable prior written notice, execute modifications to the Loan Documents changing the interest rate for the Loan, provided that the initial weighted average of the interest rate spreads for the Loan after such modification shall not exceed the weighted average of the interest rate spreads for the Loan immediately prior to such modification.  The Borrower shall also provide opinions and title insurance reasonably necessary to effectuate the same;

(g)           update the representations and warranties contained in the Loan Documents as of the closing date of the Securitization and make any such representation and warranties with respect to the Property, Borrower, Guarantor and the Loan Documents as are customarily provided in securitization transactions and as may be reasonably requested by the holder of the Note or the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date thereof, including the representations and warranties made in the Loan Documents; and

(h)           supply to Lender, at Lender’s sole cost and expense, such documentation, financial statements and reports in form and substance reasonably required for Lender to comply with Regulation S-X of the federal securities law, if applicable.

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Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, Lender shall reimburse Borrower for all of the Borrower’s reasonable costs and expenses incurred in connection with Borrower’s complying with requests made under this Section 9.1 and Section 9.2.

Section 9.1             Securitization Indemnification.  Borrower understands that certain of the Provided Information may be included in disclosure documents in connection with the Securitization, including, without limitation, a prospectus supplement, private placement memorandum, offering circular or other offering document (each a “Disclosure Document”) and may also be included in filings (an “Exchange Act Filing”) with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization.  In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, Borrower will cooperate with the holder of the Note in updating the Provided Information by providing all current information reasonably necessary to keep the Provided Information accurate and complete in all material respects.

Section 9.3             Servicer.  At the option of Lender, the Loan may be serviced by a servicer/trustee (the “Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement (the “Servicing Agreement”) between Lender and Servicer. Borrower may rely upon the written instructions, approvals, acceptances, waivers and decisions given to Borrower by Servicer as if made by Lender and Lender agrees to bound thereby.

Section 9.4             Recourse.

The Debt shall be fully recourse to Borrower.

Section 9.5             Waivers.

(a)           Borrower waives:

(A)          any right to require Lender to proceed against any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power before proceeding against Borrower;

(B)           any defense based upon any legal disability or other defense of, any guarantor of any other person or by reason of the cessation or limitation of the liability of any guarantor from any cause other than full payment of all sums payable under the Note, this Agreement and any of the other Loan Documents;

(C)           any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal;

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(D)          any defense based upon any failure by Lender to obtain collateral for the indebtedness or failure by Lender to perfect a lien on any collateral;

(E)           presentment, demand, protest and notice of any kind except as set forth in this Agreement;

(F)           any defense based upon any failure of Lender to give notice of sale or other disposition of any collateral to any other person or entity or any defect in any notice that may be given in connection with any sale or disposition of any collateral;

(G)           any defense based upon any election by Lender, in any bankruptcy proceeding, of the application or non-application of Section 1111(6)(2) of the Bankruptcy Code or any successor statute;

(H)          any defense based upon any use of cash collateral under Section 363 of the Bankruptcy Code;

(I)            any defense based upon any agreement or stipulation entered into by Lender with respect to the provision of adequate protection in any bankruptcy proceeding;

(J)            any defense based upon any borrowing or any grant of a security interest under Section 364 of the Bankruptcy Code;

(K)          any defense based upon the avoidance of any security interest in favor of Lender for any reason;

(L)           any defense based upon any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding, including any discharge of, or bar or stay against collecting, all or any of the obligations evidenced by the Note or owing under any of the Loan Documents; and

(M)         any defense or benefit based upon Borrower’s, or any other party’s, resignation of the portion of any obligation secured by the applicable Security Instruments to be satisfied by any payment from any such party.

(N)          any claim or other right which Borrower might now have or hereafter acquire against any other person that arises from the existence or performance of any obligations under the Note, this Agreement, the Security Instruments or the other Loan Documents, including, without limitation, any of the following: (i) any right of subrogation, reimbursement, exoneration, contribution, or indemnification; or (ii) any right to participate in any claim or remedy of Lender against any collateral

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security therefor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law; and

Section 9.6             Intercreditor Agreements.

Lender, in one or more capacities, is party to a certain intercreditor agreement dated on or around the date hereof (the “Intercreditor Agreement”), memorializing its rights and obligations with respect to the Loan, Borrower, Mezzanine Subsidiaries and the Mezzanine Assets.  Borrower hereby acknowledges and agrees that (i) such Intercreditor Agreement is intended solely for the benefit of Lender and (ii) Borrower is not an intended third party beneficiary of any of the provisions therein and shall not be entitled to rely on any of the provisions contained therein.  Lender shall have no obligation to disclose to Borrower the contents of the Intercreditor Agreement.  Borrower’s obligations hereunder are independent of such Intercreditor Agreement and remain unmodified by the terms and provisions thereof.

Section 9.7             UCC Plus/Eagle 9 UCC Insurance Policies.

Borrower hereby covenants that upon request of Lender, Borrower shall promptly cooperate with Lender in obtaining UCC-Plus or Eagle 9 UCC insurance policies with respect to the collateral pledged to Lender pursuant to the Pledge Agreement and, if available, the Security Agreement.  Such cooperation may include, without limitation, delivery of organizational documents, authority documents and supplemental UCC filings.  Borrower shall pay all costs and expenses incurred by Lender in obtaining such UCC-Plus or Eagle 9 UCC insurance policies, including the premium therefor.

ARTICLE X

MISCELLANEOUS

Section 10.1           Survival.

This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents.  Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party.  All covenants, promises and agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender.

Section 10.2           Lender’s Discretion.

Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or

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not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

Section 10.3           Governing Law.

(a)           THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS), PROVIDED HOWEVER, THAT WITH RESPECT TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED BY THIS AGREEMENT, THE SECURITY INSTRUMENTS AND THE OTHER LOAN DOCUMENTS, AND THE DETERMINATION OF DEFICIENCY JUDGMENTS, THE LAWS OF THE STATE WHERE EACH INDIVIDUAL PROPERTY IS LOCATED SHALL APPLY.

(b)           WITH RESPECT TO ANY CLAIM OR ACTION ARISING HEREUNDER OR UNDER THIS AGREEMENT, THE NOTE, OR THE OTHER LOAN DOCUMENTS, BORROWER AND LENDER EACH (A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF, AND (B) IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING ON VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS BROUGHT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  NOTHING IN THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS INSTRUMENT WILL BE DEEMED TO PRECLUDE LENDER FROM BRINGING AN ACTION OR PROCEEDING WITH RESPECT HERETO IN ANY OTHER JURISDICTION.

Section 10.4           Modification, Waiver in Writing.

No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given.  Except as otherwise expressly provided in this Agreement or in any of the other Loan Documents, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

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Section 10.5           Delay Not a Waiver.

Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

Section 10.6           Notices.

All notices or other written communications hereunder shall be deemed to have been properly given upon receipt or rejection if sent either by (i) overnight delivery with any reputable overnight courier service, charges prepaid, return receipt requested or (ii)  registered or certified mail, postage prepaid, return receipt requested, in either event, addressed as follows:

If to Borrower:	GMH Communities, LP
	10 Campus Boulevard
	Newtown Square, PA 19073
	Attention: Joseph Macchione
With a copy to:	Morgan, Lewis & Bockius LLP
	1701 Market Street
	Philadelphia, PA 19103
	Attention: Michael J. Pedrick, Esq.
If to Lender:	Wachovia Bank, National Association
	One Wachovia Center
	301 South College Street, NC0172
	Charlotte, NC 28288
	Attention: Rex Rudy
With copy to:	Cadwalader, Wickersham & Taft LLP
	227 West Trade Street, Suite 2400
	Charlotte, NC 28202
	Attention: Richard Madden, Esq.

or addressed as such party may from time to time designate by written notice to the other parties.

Either party by notice to the other may designate additional or different addresses for subsequent notices or communications.

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Section 10.7           Trial by Jury.

BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER AND BORROWER ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER OR LENDER, AS APPLICABLE.

Section 10.8           Headings.

The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

Section 10.9           Severability.

Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement shall be prohibited by or invalid under Applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

Section 10.10         Preferences.

Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder.  To the extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, State or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

Section 10.11         Waiver of Notice.

Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right to receive

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any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower.

Section 10.12         Remedies of Borrower.

In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment.  The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.

Section 10.13         Expenses; Indemnity.

(a)           Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender within five (5) days of receipt of written notice from Lender for all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by Lender as to any legal matters arising under this Agreement or the other Loan Documents with respect to the Properties or the Collateral; (ii) Lender’s ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (iii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Borrower; (iv) securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement; (v) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents; (vi) enforcing or preserving any rights, in response to third-party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Properties, the Collateral or any other security given for the Loan; and (vii) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Properties or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work out” or of any insolvency or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender.

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(b)           Borrower shall indemnify, defend and hold harmless Lender from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for Lender in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Lender shall be designated a party thereto), that may be imposed on, incurred by, or asserted against Lender in any manner relating to or arising out of (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, or (ii) the use or intended use of the proceeds of the Loan (collectively, the “Indemnified Liabilities”); provided, however, that Borrower shall not have any obligation to Lender hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of Lender.  To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under Applicable Law to the payment and satisfaction of all Indemnified Liabilities incurred by Lender.

(c)           Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless Lender and the Indemnified Parties from and against any and all losses (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense, and settlement of losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA, the Code, any State statute or other similar law that may be required, in Lender’s sole discretion) that Lender may incur, directly or indirectly, as a result of a default under Sections ‎4.1.8 or ‎5.2.8 hereof.

(d)           Borrower covenants and agrees to pay for any consent, approval, waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of the Loan Documents as a result of a request or action of Borrower and Lender shall be entitled to require payment of such fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver or confirmation.

Section 10.14         Schedules and Exhibits Incorporated.

The Schedules and Exhibits annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

Section 10.15         Offsets, Counterclaims and Defenses.

Any assignee of Lender’s interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

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Section 10.16         No Joint Venture or Partnership; No Third-party Beneficiaries.

(a)           Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender.  Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Properties other than that of mortgagee, beneficiary or lender.

(b)           This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.  All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.

Section 10.17         Publicity.

All news releases, publicity or advertising by Borrower, Lender or their respective Affiliates through any media intended to reach the general public which refers to the Loan Documents or the financing evidenced by the Loan Documents, to Borrower, Lender or any of their respective Affiliates shall be subject to the prior written approval of Lender and Borrower as applicable, which shall not be unreasonably withheld.  Borrower shall request such approval from Lender as it relates to the Related Parties.  Notwithstanding the foregoing, disclosure required by Applicable Laws (as reasonably determined by Borrower, Lender or the Related Parties, as applicable) shall not be subject to the prior written approval of Lender or Borrower, as applicable.  Further notwithstanding the foregoing, nothing in this Section 10.17 shall limit (i) Lender’s rights set forth in Sections 9.1, 9.2 or 10.23 or (ii) Lender’s discretion with respect to the contents contained in any Disclosure Document.

Section 10.18         Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets.

(a)           Property Guarantor acknowledges that Lender has made the Loan to Borrower upon the security of Property Guarantor’s collective interest in the Properties and in reliance upon the aggregate of the Properties taken together being of greater value as collateral security than the sum of each Individual Property taken separately.  Property Guarantor agree that the Security Instruments are and will be cross-collateralized and cross-defaulted with each other so that subject to the release or substitution of any Individual Property as provided herein (i) an Event of Default under any of the Security Instruments shall constitute an Event of Default under each of the other Security Instruments which secure the Property Guaranty; (ii) an Event of Default under the Property Guaranty or this Agreement shall constitute an Event of Default

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under each Security Instrument; (iii) each Security Instrument shall constitute security for the Guaranty as if a single blanket lien were placed on all of the Properties as security for the Note; and (iv) such cross collateralization shall in no event be deemed to constitute a fraudulent conveyance.

(b)           To the fullest extent permitted by Applicable Law, Borrower, for itself and its successors and assigns, and on behalf of Property Guarantor waives all rights to a marshalling of the assets of Borrower, Borrower’s partners and others with interests in Borrower, and of the Properties, or to a sale in inverse order of alienation in the event of foreclosure of all or any of the Security Instruments, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Properties for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Properties in preference to every other claimant whatsoever.  In addition, Borrower, for itself and its successors and assigns and Property Guarantor, waives in the event of foreclosure of any or all of the Security Instruments, any equitable right otherwise available to Borrower or Property Guarantor which would require the separate sale of the Properties or require Lender to exhaust its remedies against any Individual Property or any combination of the Properties before proceeding against any other Individual Property or combination of Properties; and further in the event of such foreclosure Borrower does hereby expressly consents to and authorizes, at the option of Lender, the foreclosure and sale either separately or together of any combination of the Properties.

Section 10.19         Waiver of Counterclaim.

Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

Section 10.20         Conflict; Construction of Documents; Reliance.

In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control.  The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same.  Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender.  Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lender’s exercise of any such rights or remedies.  Borrower

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acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates.

Section 10.21         Brokers and Financial Advisors.

Each of Borrower and Lender hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement.  Each of Borrower and Lender shall indemnify, defend and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind (including Lender’s reasonable attorneys’ fees and expenses) in any way relating to a breach of the representation in the preceding sentence.  The provisions of this ‎Section 10.21 shall survive the expiration and termination of this Agreement and the payment of the Debt.

Section 10.22         Prior Agreements.

This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, between Borrower and/or its Affiliates and Lender are superseded by the terms of this Agreement and the other Loan Documents.

Section 10.23         Assignment; Participation.   Lender may at any time, at no cost to Borrower, grant to one or more banks or other institutions (each a “Participant”) participating interests in the Loan (each a “Participation”).  In the event of any such grant by Lender of a Participation to a Participant (whether or not Borrower was given notice thereof), Lender shall remain responsible for the performance of its obligations hereunder, and Borrower shall continue to deal solely and directly with Lender in connection with all rights and obligations hereunder.  Such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver, without the consent of the Participants, which would effect any of the following:  (a) reduce the principal of, or interest on, the Note or any fees due hereunder or any other amount due hereunder or under any other Loan Document; (b) postpone any date fixed for any payment of principal of, or interest on, the Note or any fees due hereunder or under any other Loan Document; (c) release any material portion of the Properties or other Collateral for the Loan other than in accordance with the Loan Documents; (d) release any Guarantor, in whole or in part, other than in accordance with the Loan Documents; or (e) increase the Loan amount.  Each Participant shall have the right to effect a Securitization with respect to its Participation interest. Borrower agrees to provide all assistance reasonably requested by Lender to enable Lender to sell Participations as aforesaid, or make assignments of its interest in the Loan as hereinafter provided in this Section.  Borrower and Lender shall execute such modifications to the Loan Documents as shall, in the reasonable judgment of Lender, be necessary or desirable in connection with assignments in accordance with the foregoing provisions of this Section; provided, however, that no such modifications shall increase Borrower’s liability or obligations, or decrease its rights, in respect of the Loan.  Lender and any Participant may at any time freely assign all or any portion of its rights under this Agreement and the Note.  Notwithstanding anything in this Agreement to the contrary, Borrower recognizes that in connection with

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Lender’s selling of Participations or making of assignments, any or all documentation, financial statements, appraisals and other data, or copies thereof, relevant to Borrower, any Guarantor, any Collateral or the Loan may be exhibited to and retained by any such Participant or assignee or prospective Participant or assignee.  Lender’s delivery of any financial statements and appraisals to any such Participant or assignee or prospective Participant or assignee shall be accompanied by Lender’s standard confidentiality statement indicating that the same are delivered on a confidential basis.

Section 10.24         Treatment of Certain Information; Confidentiality.

Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement , (g) with the consent of the Trust and the  Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to Lender or any of  its Affiliates on a nonconfidential basis from a source other than the Trust or Borrower.

For purposes of this Section, “Information” means all information received from the Borrower or any of its Affiliates relating to the Borrower or its businesses, other than any such information that is available to Lender on a nonconfidential basis prior to disclosure by the  Borrower, provided that, in the case of information received from the  Borrower or any of its Affiliates after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

BORROWER:
GMH COMMUNITIES, LP, a Delaware limited partnership
By:	GMH Communities GP Trust, a Delaware statutory trust, its general partner
By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
LENDER:
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association
By:	/s/ Rex E. Rudy
	Name: Rex E. Rudy
	Title: Managing Director

EXHIBIT A

FORM OF COMPLIANCE CERTIFICATE

                      , 200    

Wachovia Bank, National Association
One Wachovia Center
301 South College Street
Mail Code:  NC0172
Charlotte, North Carolina  28288-0166

Ladies and Gentlemen:

Reference is made to that certain Loan Agreement dated as of October 2, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among GMH Communities, LP (the “Borrower”) and Lender.  Capitalized terms used herein, and not otherwise defined herein, have their respective meanings given them in the Loan Agreement.

Pursuant to Section 5.1.10 of the Loan Agreement, the undersigned hereby certifies to the Lender as follows:

(1)           The undersigned is the                                 of the Borrower.

(2)           The undersigned has examined the books and records of the Borrower and has conducted such other examinations and investigations as are reasonably necessary to provide this Compliance Certificate.

(3)           No Default or Event of Default exists [if such is not the case, specify such Default or Event of Default and its nature, when it occurred and whether it is continuing and the steps being taken by the Borrower with respect to such event, condition or failure].

(4)           The representations and warranties made or deemed made by the Borrower and any Key Entity in the Loan Documents to which any is a party, are true and correct in all material respects on and as of the date hereof except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct on and as of such earlier date) and except for changes in factual circumstances not prohibited under the Loan Documents.

(5)           Attached hereto as Schedule 1 are reasonably detailed calculations establishing whether or not the Borrower and its Subsidiaries were in compliance with the covenants contained in Sections 5.3 and 5.4 of the Credit Agreement.

IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date first above written.

Name:

Title:

NOTICE OF BORROWING

                         , 200   

Wachovia Bank, National Association
One Wachovia Center
301 South College Street
Mail Code:  NC0172
Charlotte, North Carolina  28288-0166

Ladies and Gentlemen:

Reference is made to that certain Loan Agreement dated as of October 2, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and among GMH Communities, LP (the “Borrower”) and Lender.  Capitalized terms used herein, and not otherwise defined herein, have their respective meanings given them in the Loan Agreement. Capitalized terms used herein, and not otherwise defined herein, have their respective meanings given them in the Loan Agreement.

Pursuant to Section 2.1.5 of the Loan Agreement, Borrower hereby requests that the Lender make an Additional Advance on the date hereof to the Borrower as follows:

First, Amount of Additional Advance:		$
Second, Interest Period for Additional Advance:
	o	30 days
	o	60 days
	o	90 days

The proceeds of this Additional Advance will be used for the following purposes:                                             .[INSERT DESCRIPTION]

Borrower hereby represents and warrants to Lender that no Default or Event of Default exists [if such is not the case, specify such Default or Event of Default and its nature, when it occurred and whether it is continuing and the steps being taken by the Borrower with respect to such event, condition or failure].

The representations and warranties made or deemed made by the Borrower and any Key Entity in the Loan Documents to which any is a party, are true and correct in all material respects on and as of the date hereof except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct on and as of such earlier date) and except for changes in factual circumstances not prohibited under the Loan Documents.

Sincerely,

SCHEDULE A

INDIVIDUAL PROPERTIES, PROPERTY GUARANTORS, ALLOCATED LOAN
AMOUNTS AND ALLOCATED VALUES

Individual Property	Property Guarantor	Allocated Value
University Fields 200 Curtis Street Savoy, Illinois	Savoy Village Associates, LLC	$	25,237,798.00
University Centre 5200 Croyden Avenue Kalamazoo, Michigan	Croyden Avenue Associates, LLC	$	26,946,062.00
The Summit 1801 Marks Avenue Mankato, Minnesota	Monks Road Associates, LLC	$	23,760,480.00
University Oaks 21 National Guard Rd Columbia, SC	South Carolina Associates, LLC	$	29,435,713.00
University Highlands 2800 Enterprise Blvd Reno, Nevada	Reno Associates, LLC	$	36,978,807.00
University Uptown 2700 West Oak Denton, Texas	Denton Associates, LLC	$	36,978,807.00
Blanton Commons Lankford Drive Valdosta, Georgia	Lankford Drive Associates, LLC	$	26,808,504.00

SCHEDULE B

MEZZANINE ASSETS, MEZZANINE ASSET OWNERS, MEZZANINE ALLOCATED
LOAN AMOUNTS AND MEZZANINE ALLOCATED VALUES

Mezzanine Asset	Mezzanine Subsidiary	Mezzanine Asset Owner	Mezzanine Allocated Loan Amount		Mezzanine Allocated Value
University Commons: Bloomington, IN	Clarizz Boulevard Associates Intermediate, LLC	Clarizz Boulevard Associates, LLC	$	5,667152	$	26,683,052
University Commons: Athens, GA	Lakeside Associates Intermediate, LLC	Lakeside Associates, LLC	$	2,095,346	$	17,675,230
University Commons: Urbana, IL	Urbana Associates Intermediate, LLC	Urbana Associates, LLC	$	2,642,732	$	26,306,200
University Commons: Lexington, KY	Red Mile Road Associates Intermediate, LLC	Red Mile Road Associates, LLC	$	1,917,461	$	19,591,215
University Commons: Baton Rouge, LA	Burbank Drive Associates Intermediate III, LLC	Burbank Drive Associates III, LLC	$	1,444,136	$	21,159,200
University Commons: Eugene, OR	Commons Drive Associates Intermediate, LLC	Commons Drive Associates, LLC	$	1,468,027	$	21,548,677
University Commons: East Lansing, MI	Abbott Road Associates Intermediate, LLC	Abbott Road Associates, LLC	$	3,252,900	$	20,981,215
University Commons: Starkville, MS	Campus View Drive Associates Intermediate, LLC	Campus View Drive Associates, LLC	$	680,524	$	10,649,316
University Commons: Cayce, SC	Alexander Road Associates Intermediate, LLC	Alexander Road Associates, LLC	$	2,354,558	$	26,798,100
University Commons: Oxford, OH	Brown Road Associates Intermediate, LLC	Brown Road Associates, LLC	$	2,154,091	$	21,344,944
University Commons: Tuscaloosa, AL	Keller Boulevard Associates Intermediate, LLC	Keller Boulevard Associates, LLC	$	3,075,000	$	23,240,896

SCHEDULE C

ENCUMBERED PROPERTIES

1.	Cambridge at Southern-Statesboro, GA
2.	University Crescent
3.	University Greens
4.	University Heights
5.	University Lodge
6.	University Pines
7.	University Trails
8.	University Court
9.	University Estates
10.	University Gables
11.	University Glades
12.	University Manor
13.	University Mills
14.	University Place
15.	Collegiate Hall
16.	Campus Club-Statesboro
17.	University Edge
18.	Campus Connection
19.	University Pointe
20.	College Park-Chapel Ridge
21.	Grand Marc at University Village
22.	The Verge
23.	Willowtree Apartments and Towers
24.	Campus Walk
25.	Pirates Cove
26.	University Walk
27.	Campus Club-Gainesville
28.	The Enclave
29.	The Ridge

30.	The View
31.	State College Park
32.	Nittany Crossing
33.	GrandMarc at Seven Corners
34.	Campus Edge Associates LLC
35.	Chapel View
36.	Campus Ridge Apartments
37.	Southview Apartments
38.	Stone Gate Apartments
39.	The Commons Apartments
40.	University Crossings (KS)
41.	Seminole Suites
42.	The Tower at 3rd
43.	Campus Walk-UNCW
44.	University Crossing
45.	University Meadows
46.	Pegasus Connection
47.	Royal Riverwood Manor (Univ. Village)
48.	Jacobs Heights
49.	University Commons (Norman, OK)
50.	University Commons (State College)
51.	Aspen Apartments
52.	Brookstone Village
53.	College Suites Stadium
54.	College Manor Apartments
55.	Jacob Height Phase III
56.	Blanton Commons Phase II

SCHEDULE D

O&M PROGRAMS

NONE

SCHEDULE E

SOURCES AND USES

(see attached page)

SCHEDULE 4.1.1

ORGANIZATIONAL CHART

SCHEDULE 4.1.4

LITIGATION

1.GMH Communities Trust (“Trust”) is currently involved in several class action lawsuits that are pending class certification. Material facts surrounding the litigation are presented in the Trust’s periodic reports as filed with the United States Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and in each of its subsequent Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2006 and June 30, 2006.  The Trust will continue to report material updates with respect to such litigation in its periodic reports filed in the future.

EX-10.32

Exhibit 10.32

FIRST AMENDMENT TO LOAN AGREEMENT

THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated as of October 31, 2006 (this “Amendment”), between WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, having an office at 301 South College Street, Charlotte, North Carolina 28288 (“Lender”) and GMH Communities, LP, a Delaware limited partnership, having an address at 10 Campus Boulevard, Newtown Square, PA 19073 (“Borrower”).

W I T N E S S E T H:

WHEREAS, Lender and Borrower entered into that certain Loan Agreement dated as of October 2, 2006 (as amended and in effect from time to time, the “Loan Agreement”); and

WHEREAS, Borrower has requested that the Lender amend certain provisions of the Loan Agreement, and subject to the terms and conditions hereof, Lender is willing to do so.

NOW THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.             Defined Terms.  Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement.

2.             Amendments.

a.     Section 5.4 of the Loan Agreement is hereby amended by the addition of a new Subsection (i) thereto as follows:

(i)            Indebtedness incurred as a result of the financing of premiums for Policies being obtained by Borrower effective as of November 1, 2006 and for which premiums are otherwise payable on November 1, 2006.

b.     Section 6.1(b) of the Loan Agreement is hereby amended by replacing such Section in its entirety with the following:

(b)           All insurance provided for in Section 6.1(a) hereof shall be obtained under valid and enforceable policies (the “Policies” or in the singular, the “Policy”), in such forms as may be reasonably satisfactory to Lender, issued by financially sound and responsible insurance companies authorized to do business in the State in which the Insured Asset is located and approved by Lender.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of “BBB” or better by S&P and

its equivalent from each of the other Rating Agencies and/or a general policy rating of “A” or better and a financial class of VIII or better by A.M. Best Company, Inc., provided, however, that Lender herby acknowledges and agrees that Integon Specialty Insurance Company shall be an approved insurer for purposes of this Section 6.1(b) notwithstanding the fact that its general policy rating is “A-”.  The Policies described in Section 6.1(a) shall designate Lender and its successors and assigns as additional insureds, mortgagees and/or loss payee as deemed appropriate by Lender. To the extent such Policies are not available as of the Closing Date, Borrower shall deliver to Lender prior to the Closing Date an Acord 28 or similar certificate of insurance evidencing the coverages and amounts required hereunder and, upon request of Lender as soon as available after the Closing Date, certified copies of all Policies.  Borrower shall deliver to Lender within thirty (30) days of the Closing Date, the final Policies required to be maintained pursuant to this Article VI.  Not less than ten (10) days prior to the expiration dates of any insurance coverage in place with respect to the Insured Asset, Borrower shall deliver to Lender an Acord 28 or similar certificate, accompanied by evidence satisfactory to Lender of payment of the premiums due in connection therewith (the “Insurance Premiums”), and as soon as available thereafter, certified copies of all renewal Policies.

3.             Conditions of Effectiveness.  Notwithstanding any other provision of this Amendment, it is understood and agreed that this Amendment shall not become effective until the Lender shall have received duly executed counterparts of this Agreement executed by Lender and Borrower.

4.             Representations and Warranties.  Borrower represents and warrants that, after giving effect to this Amendment, the representations and warranties contained in the Loan Agreement and the Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of such date.  Borrower represents and warrants that, after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing, and the execution, delivery and performance of this Amendment shall not cause or constitute any such Default or Event of Default.

5.             Reaffirmation of Guaranty.  Each of Guarantor and Mezzanine Property Guarantor consents to the execution and delivery by Borrower of this Amendment and ratifies and confirms the terms of the Guaranty and the Mezzanine Property Guaranty, as applicable, with respect to the indebtedness now or hereafter outstanding under the Loan Agreement as amended hereby and all promissory notes issued thereunder.  Nothing contained herein to the contrary shall release, discharge, modify, change or affect the original liability of either the Guarantor or the Mezzanine Property Guarantor under the Guaranty or the Mezzanine Property Guaranty, as applicable.

6.             Effect of Amendment.  Except as set forth expressly herein, all terms of the Loan Agreement, as amended hereby, and the other Loan Documents shall be and remain in

2

full force and effect and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Lender.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under the Loan Agreement, nor constitute a waiver of any provision of the Loan Agreement.  This Amendment shall constitute a Loan Document for all purposes of the Loan Agreement.  All references to the “Loan Agreement” in any Loan Document shall mean the Loan Agreement as amended hereby.

7.             Governing Law.  This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York and all applicable federal laws of the United States of America.

8.             Costs and Expenses.  Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and out-of-pocket expenses of outside counsel for Lender with respect thereto.

9.             Counterparts.  This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument.  Each party may rely upon a facsimile signature of each other party hereto as if it were an original.

10.           Binding Nature.  This Amendment shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns.

11.           Entire Understanding.  This Amendment sets forth the entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.

[Signature Page Follows]

3

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

BORROWER:
GMH COMMUNITIES, LP, a Delaware limited partnership
By:		GMH Communities GP Trust, a Delaware statutory trust, its general partner
		By:	/s/ Joseph M. Macchione
		Name: Joseph M. Macchione
		Title: Vice President
LENDER:
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association
By:	/s/ Rex e. Rudy
	Name: Rex E. Rudy
	Title: Managing Director

4

GUARANTOR:
SAVOY VILLAGE ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CROYDEN AVENUE ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
MONKS ROAD ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
SOUTH CAROLINA ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
RENO ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
DENTON ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

5

LANKFORD DRIVE ASSOCIATES, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES TRUST, a Maryland real estate investment trust
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CLARIZZ BOULEVARD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
LAKESIDE ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
URBANA ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

6

RED MILE ROAD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
BURBANK DRIVE ASSOCIATES INTERMEDIATE III, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
COMMONS DRIVE ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
ABBOTT ROAD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CAMPUS VIEW DRIVE ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

7

ALEXANDER ROAD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
BROWN ROAD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
KELLER BOULEVARD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
COLLEGE PARK INVESTMENTS LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
COLLEGE PARK MANAGEMENT, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

8

COLLEGE PARK MANAGEMENT TRS, INC.
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH MILITARY HOUSING, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH MILITARY HOUSING INVESTMENTS, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES TRS, INC.
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES GP TRUST
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES SERVICES, INC.
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

9

MEZZANINE PROPERTY GUARANTOR:
SAVOY VILLAGE ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CROYDEN AVENUE ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
MONKS ROAD ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
SOUTH CAROLINA ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
RENO ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

10

DENTON ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
LANKFORD DRIVE ASSOCIATES INTERMEDIATE, LLC
	By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

11

EX-10.33

Exhibit 10.33

SECOND AMENDMENT TO LOAN AGREEMENT

THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of February 6, 2007 (this “Amendment”), between WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, having an office at 301 South College Street, Charlotte, North Carolina 28288 (“Lender”) and GMH Communities, LP, a Delaware limited partnership, having an address at 10 Campus Boulevard, Newtown Square, PA 19073 (“Borrower”).

W I T N E S S E T H:

WHEREAS, Lender and Borrower entered into that certain Loan Agreement dated as of October 2, 2006 and amended on October 31, 2006 (as amended and in effect from time to time, the “Loan Agreement”) and

WHEREAS, Borrower has requested that the Lender amend certain provisions of the Loan Agreement, and subject to the terms and conditions hereof, Lender is willing to do so.

NOW THEREFORE, in consideration of the premises and mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.             Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement.

2.             Amendments.

a.             The definition of “Initial Maturity Date” set forth in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

““Initial Maturity Date” shall mean June 1, 2007.”

b.             The introductory paragraph of Section 2.2.1(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“Extension of the Initial Maturity Date.  Borrower shall have the option to extend the term of the Loan beyond the Initial Maturity Date for either (x) a term of three (3) months (“Extension Option One”) to a date which is the earlier of (1) September 1, 2007 and (2) the date specified in writing by Borrower which shall not be later than the date that is three (3) months from the Initial Maturity Date (such date in (1) or (2) is the “Option One Maturity Date”) or (y) for a term of four (4) months (“Extension Option Two”) to October 2, 2007 (each such date, the “Extended Maturity Date” and the period from the Initial Maturity Date through the Extended

Maturity Date is the “Extension Term”). Borrower may exercise Extension Option One, upon satisfaction of the following terms and conditions:”

3.             Conditions of Effectiveness. Notwithstanding any other provision of this Amendment, it is understood and agreed that this Amendment shall not become effective until the Lender shall have received duly executed counterparts of this Agreement executed by Lender and Borrower.

4.             Representations and Warranties. Borrower represents and warrants that, after giving effect to this Amendment, the representations and warranties contained in the Loan Agreement and the Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of such date. Borrower represents and warrants that, after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing, and the execution, delivery and performance of this Amendment shall not cause or constitute any such Default or Event of Default.

5.             Reaffirmation of Guaranty. Each of Guarantor and Mezzanine Property Guarantor consents to the execution and delivery by Borrower of this Amendment and ratifies and confirms the terms of the Guaranty and the Mezzanine Property Guaranty, as applicable, with respect to the indebtedness now or hereafter outstanding under the Loan Agreement as amended hereby and all promissory notes issued thereunder. Nothing contained herein to the contrary shall release, discharge, modify, change or affect the original liability of either the Guarantor or the Mezzanine Property Guarantor under the Guaranty or the Mezzanine Property Guaranty, as applicable.

6.             Effect of Amendment. Except as set forth expressly herein, all terms of the Loan Agreement, as amended hereby, and the other Loan Documents shall be and remain in full force and effect and are hereby in all respect ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Lender. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under the Loan Agreement, nor constitute a waiver of any provision of the Loan Agreement. This Amendment shall constitute a Loan Document for all purposes of the Loan Agreement. All references to the “Loan Agreement” in any Loan Document shall mean the Loan Agreement as amended hereby.

7.             Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of’ the State of New York and all applicable federal laws of the United States of America.

8.             Costs and Expenses. Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and out-of-pocket expenses of outside counsel for Lender with respect thereto.

9.             Counterparts. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, each of which shall be deemed an original

2

and all of which, taken together, shall be deemed to constitute one and the same instrument. Each party may rely upon a facsimile signature of each other party hereto as if it were an original.

10.           Binding Nature. This Amendment shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns.

11.           Entire Understanding. This Amendment sets forth the entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.

[Signature Page Follows]

3

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

BORROWER:
GMH COMMUNITIES, LP, a Delaware limited partnership
By:		GMH Communities GP Trust, a Delaware statutory trust, its general partner
		By:/s/ Joseph M. Macchione
		Name: Joseph M. Macchione
		Title: Vice President
LENDER:
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association
By:	/s/ Rex e. Rudy
	Name: Rex E. Rudy
	Title: Managing Director

GUARANTOR:
SAVOY VILLAGE ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CROYDEN AVENUE ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
MONKS ROAD ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
SOUTH CAROLINA ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
RENO ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
DENTON ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

LANKFORD DRIVE ASSOCIATES, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES TRUST, a Maryland real estate investment trust
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CLARIZZ BOULEVARD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President0
LAKESIDE ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
URBANA ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

RED MILE ROAD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
BURBANK DRIVE ASSOCIATES INTERMEDIATE III, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
COMMONS DRIVE ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
ABBOTT ROAD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CAMPUS VIEW DRIVE ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

ALEXANDER ROAD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
BROWN ROAD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
KELLER BOULEVARD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
COLLEGE PARK INVESTMENTS LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
COLLEGE PARK MANAGEMENT, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

COLLEGE PARK MANAGEMENT TRS, INC.
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH MILITARY HOUSING, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH MILITARY HOUSING INVESTMENTS, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES TRS, INC.
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES GP TRUST
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
GMH COMMUNITIES SERVICES, INC.
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

MEZZANINE PROPERTY GUARANTOR:
SAVOY VILLAGE ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
CROYDEN AVENUE ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
MONKS ROAD ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
SOUTH CAROLINA ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
RENO ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

DENTON ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President
LANKFORD DRIVE ASSOCIATES INTERMEDIATE, LLC
	By:/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: Vice President

EX-10.34

Exhibit 10.34

PLEDGE AGREEMENT

This PLEDGE AGREEMENT, dated as of October 2, 2006, is made by GMH COMMUNITIES, LP, a Delaware limited partnership (“Borrower”), SAVOY VILLAGE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, CROYDEN AVENUE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, MONKS ROAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, SOUTH CAROLINA ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, RENO ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, DENTON ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, LANKFORD DRIVE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company (collectively, the “Property Pledgors”), CLARIZZ BOULEVARD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, LAKESIDE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, URBANA ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, RED MILE ROAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, BURBANK DRIVE ASSOCIATES INTERMEDIATE III, LLC, a Delaware limited liability company, COMMONS DRIVE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, ABBOTT ROAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, CAMPUS VIEW DRIVE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, ALEXANDER ROAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company, BROWN ROAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company and KELLER BOULEVARD ASSOCIATES INTERMEDIATE, LLC and LANKFORD DRIVE ASSOCIATES INTERMEDIATE II, LLC, a Delaware limited liability company (collectively the “Mezzanine Subsidiary Pledgors”) and COLLEGE PARK INVESTMENTS LLC, a Delaware limited liability company (“CPI”) (Borrower, together with the Property Pledgors, the Mezzanine Subsidiary Pledgors and CPI are individually, a “Pledgor” and collectively, the “Pledgors”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION, as lender (the “Lender”) parties to the Loan Agreement referred to below.

RECITALS:

WHEREAS, pursuant to the Loan Agreement, dated as of October 2, 2006 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among Borrower and the Lender, the Lender has agreed to make a loan to the Borrower upon the terms and subject to the conditions set forth therein, such loan is evidenced by that certain Note, dated as of the date hereof, issued by the Borrower thereunder (the “Note”);

WHEREAS, in connection with the Loan, each of the Mezzanine Subsidiary Pledgors and CPI have executed and delivered that certain Guaranty, dated as of October 2, 2006, pursuant to which such Mezzanine Subsidiary Pledgors and CPI guaranty the obligations of the Borrower under the Loan Agreement, the Note and the other Loan Documents (the “Material Subsidiary Guaranty”);

WHEREAS, in connection with the Loan, each of the Property Pledgors have executed and delivered that certain Guaranty, dated as of October 2, 2006, pursuant to which such Property Pledgors guaranty the obligations of the Borrower under the Loan Agreement, the Note and the other Loan Documents (the “Property Pledgor Guaranty”); and

WHEREAS, it is a condition precedent to the obligation of the Lender to make the loan to the Borrower under the Loan Agreement that each Pledgor shall have executed and delivered this Pledge Agreement to the Lender as collateral for the obligations of the Borrower, the obligations of each Material Subsidiary Pledgor under the Material Subsidiary Guaranty and the obligations of each Property Pledgor under the Property Pledgor Guaranty.

NOW, THEREFORE, in consideration of the premises and to induce the Lender to enter into the Loan Agreement and to induce Lender to make the loan to the Borrower under the Loan Agreement, each Pledgor hereby agrees with the Lender, as follows:

1.             Defined Terms.

(a)           Unless otherwise defined herein, terms which are defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

(b)           The following terms shall have the following meanings:

“Additional Collateral”: all Accounts; all Chattel Paper; all Commercial Tort Claims; all Copyrights; all Copyright Licenses; all Deposit Accounts; all Documents; all Equipment; all General Intangibles; all Instruments; all Inventory; all Investment Property; all Letter of Credit Rights; all Patents; all Patent Licenses; all Securities Accounts, and all Investment Property held therein or credited thereto; all Trademarks; all Trademark Licenses; all Vehicles; all Goods and other property not otherwise described above; all books and records pertaining to the Collateral; and to the extent not otherwise included, all Supporting Obligations in respect of any of the foregoing, and all collateral security and guarantees given by any Person with respect to any of the foregoing, in each case as defined in the Code.

“Code”: the Uniform Commercial Code from time to time in effect in the State of New York.

“Collateral Account”: any account established to hold money Proceeds, maintained under the sole dominion and control of the Lender, subject to withdrawal by the Lender only as provided in subsection 8.

“Guaranteed Obligations”: the maximum obligations, if any, of the related Pledgor under the Material Subsidiary Guaranty or the Property Pledgor Guaranty (as such maximum obligations are specified therein), as the case may be, which to the extent applicable,is more particularly set forth on Schedule II attached hereto.

“Issuer”: each of the corporations, limited liability companies and partnerships identified on Schedule I as an issuer of Pledged Stock, Pledged LLC Interests or Pledged Partnership Interests.

“Limited Liability Company”: any Issuer identified as a limited liability company on Part B of Schedule I hereto or in a supplement hereto.

“Limited Liability Company Agreement”: as to any Limited Liability Company (or in any supplement hereto), its certificate of formation and operating agreement or other Governing Documents, as each may be amended, supplemented or otherwise modified from time to time.

“LLC Interest”: any Limited Liability Company membership interest or economic interest.

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“Mezzanine Asset Owner” shall mean each entity listed as a “Mezzanine Asset Owner” on Schedule II attached hereto.

“Obligations” the collective reference to all obligations and liabilities of each Pledgor to the Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with the obligations evidenced by the Note, the Loan Agreement, Material Subsidiary Guaranty, the Property Pledgor Guaranty or any other Loan Documents and any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Lender that are required to be paid by Pledgor pursuant to the terms of the Loan Agreement or other documents) or otherwise.

“Partnership”: any Issuer identified as a partnership on Part C of Schedule I hereto or in a supplement hereto.

“Partnership Agreement”: as to any Partnership (or in any supplement hereto), its certificate of formation and partnership agreement or other Governing Documents, as each may be amended, supplemented or otherwise modified from time to time.

“Partnership Interest”: any partnership interest or economic interest in a Partnership.

“Pledge Agreement”: this Pledge Agreement, as amended, supplemented or otherwise modified from time to time.

“Pledged Collateral”: the Pledged Stock, the Pledged LLC Interests, the Pledged Partnership Interests, the Additional Collateral and all Proceeds.

“Pledged LLC Interest”: any and all of Pledgor’s interests, including units of membership interest, in the Limited Liability Companies as set forth in Schedule I attached hereto, including, without limitation, all its rights to participate in the operation or management of the Limited Liability Companies and all its rights to properties, assets, member interests and distributions (except as otherwise provided herein) under the Limited Liability Company Agreements in respect of such member interests.

“Pledged Partnership Interest”: any and all of Pledgor’s interests, including units of partnership interest, in the Partnerships as set forth in Schedule I attached hereto, including, without limitation, all its rights to participate in the operation or management of the Partnerships and all its rights to properties, assets, member interests and distributions (except as otherwise provided herein) under the Partnership Agreements in respect of such partnership interests.

“Pledged Stock”: the shares of capital stock listed on Schedule I hereto, together with all stock certificates, options or rights of any nature whatsoever which may be issued or granted by any of the Issuers to the Pledgors in respect of the Pledged Stock while this Pledge Agreement is in effect.

“Proceeds”: all “proceeds” as such term is defined in Section 9-306(1) of the UCC and, in any event, shall include, without limitation, all dividends, distributions or other income from the Pledged Stock, Pledged LLC Interests or Pledged Partnership Interests, or collections thereon with respect thereto.

“Securities Act”: the Securities Act of 1933, as amended.

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(c)           The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not to any particular provision of this Pledge Agreement, and Section, Schedule, Annex, and Exhibit references are to this Pledge Agreement unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

2.             Pledge; Grant of Security Interest.  Each Pledgor hereby delivers, pledges, assigns, and transfers, as appropriate, to the Lender, all the Pledged Collateral and hereby grants to the Lender, a first security interest in the Pledged Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.

3.             Transfer Powers.  Concurrently with the delivery to the Lender of each certificate representing one or more shares of the Pledged Stock, or any Pledged LLC Interest or Pledged Partnership Interest which is certificated, each Pledgor shall deliver an undated stock power or transfer power covering such certificate, duly executed in blank with, if the Lender so requests, signature guaranteed.

4.             Representations and Warranties.  Each Pledgor represents and warrants that:

(a)           the shares of Pledged Stock listed on Schedule I constitute all the issued and outstanding shares of all classes of the Capital Stock of the Issuers and are represented by the certificates listed thereon;

(b)           the Pledged LLC Interests listed on Part B of Schedule I constitute all the issued and outstanding LLC Interests of all classes of the Issuers and are represented by the certificates listed thereon, if such Pledged LLC Interests are certificated;

(c)           the Pledged Partnership Interests listed on Part C of Schedule I constitute all the issued and outstanding Partnership Interests of all classes of the Issuers and are represented by the certificates listed thereon, if such Pledged Partnership Interests are certificated;

(d)           all the shares of the Pledged Stock, the Pledged LLC Interests and the Pledged Partnership Interests have been duly and validly issued and are fully paid and nonassessable;

(e)           such Pledgor is the record and beneficial owner of, and has title to, the Pledged Stock, the Pledged Partnership Interests and the Pledged LLC Interests free of any and all Liens or options in favor of, or claims of, any other Person, except the Lien created by this Pledge Agreement;

(f)            upon delivery to the Lender of the stock certificates evidencing the Pledged Stock, the certificates evidencing the Pledged LLC Interests, if any, or the certificates evidencing the Pledged Partnership Interests, if any, (and assuming the continuing possession by Lender of such certificate in accordance with the requirements of applicable law), the Lien granted pursuant to this Pledge Agreement will constitute a valid, perfected first priority Lien on the Pledged Collateral in favor of the Lender, enforceable as such against all creditors of the Pledgors and any Persons purporting to purchase any Pledged Collateral from the Pledgors;

(g)           Upon the filing of UCC-1 financing statements in the jurisdictions referenced on Schedule II attached hereto, the Liens granted pursuant to this Pledge Agreement on the Pledged

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Collateral which are not certificated shall constitute perfected first priority Liens on such Pledged Collateral which are not certificated in favor of the Lender, enforceable as such against all creditors of the Pledgors and any Persons purporting to purchase any Pledged Collateral from the Pledgors.

(h)           None of the Pledged Stock, Pledged LLC Interests or Pledged Partnership Interests (i) are dealt in or traded on securities exchanges or in securities markets, (ii) are by their terms expressly subject to Article 8 of the Uniform Commercial Code of any jurisdiction, (iii) constitute an investment company security or (iv) are held in a securities account (in each case within the meaning of Section 8-103(c) of the Code); and

(i)            All consents of each required member in each Limited Liability Company or each required partner in each Partnership to the grant of the security interests provided hereby and to the transfer of the Pledged LLC Interests or Pledged Partnership Interests, as the case may be, to the Lender or its designee pursuant to the exercise of any remedies under Section 8 hereof have been obtained and are in full force and effect.

5.             Covenants.  Each Pledgor covenants and agrees with the Lender that, from and after the date of this Pledge Agreement until the Obligations are paid in full:

(a)           If any Pledgor shall, as a result of its ownership of the Pledged Collateral, become entitled to receive or shall receive any stock certificate, partnership interest certificate or membership interest certificate or similar certificate evidencing such interest (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution for, as a conversion of, or in exchange for any shares of the Pledged Collateral, or otherwise in respect thereof, each Pledgor shall accept the same as the Lender’s agent, hold the same in trust for the Lender and deliver the same forthwith to the Lender in the exact form received, duly indorsed by such Pledgor to the Lender, if required, together with an undated stock or transfer power covering such certificate duly executed in blank and with, if the Lender so requests, signature guaranteed, to be held by the Lender, subject to the terms hereof as additional collateral security for the Obligations.  Upon the liquidation or dissolution of any of the Issuers, the Pledgor shall notify the Lender in advance of such liquidation or dissolution and the proceeds thereof shall be paid over to the Lender for repayment of the Loan in accordance with the Loan Agreement, and in case any distribution of capital shall be made on or in respect of the Pledged Collateral or any property shall be distributed upon or with respect to the Pledged Collateral pursuant to the recapitalization or reclassification of the capital of any of the Issuers or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Lender and the Issuer, subject to the terms hereof, as additional collateral security for the Obligations.  If any sums of money or property so paid or distributed in respect of the Pledged Collateral shall be received by Pledgor, such Pledgor shall, until such money or property is paid or delivered to the Lender, hold such money or property in trust for the Lender segregated from other funds of such Pledgor, as additional collateral security for the Obligations.

(b)           Without the prior written consent of the Lender, no Pledgor will (i) vote to enable, or take any other action to permit, any of the Issuers to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any of the Issuers, or (ii) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Pledged Collateral, or (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged Collateral, or any interest therein, except for the Lien provided for by this Pledge Agreement, or

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(iv) enter into any agreement or undertaking restricting the right or ability of any Pledgor or the Lender to sell, assign or transfer any of the Pledged Collateral.

(c)           Each Pledgor shall maintain the security interest created by this Pledge Agreement as a first, perfected security interest and shall defend such security interest against the claims and demands of all Persons whomsoever.  At any time and from time to time, upon the written request of the Lender, and at the sole expense of the Pledgors, each Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Lender may reasonably request for the purposes of obtaining or preserving the full benefits of this Pledge Agreement and of the rights and powers herein granted.  If any amount payable under or in connection with any of the Pledged Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the Lender, duly endorsed in a manner satisfactory to the Lender, to be held as Pledged Collateral pursuant to this Pledge Agreement.

(d)           Each Pledgor agrees to pay, and to save the Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Pledged Collateral or in connection with any of the transactions contemplated by this Pledge Agreement.

(e)           No Pledgor will, unless it shall give 30 days’ written notice to such effect to the Lender and shall have made any filing under the Uniform Commercial Code in effect in any affected jurisdiction as the Lender may reasonably request to maintain the perfected security interest granted pursuant to this Pledge Agreement, (i) change the location of its jurisdiction of organization as defined in the Uniform Commercial Code from that specified in the Loan Agreement or remove its books and records from such location or (ii) change its name, identity or structure to such an extent that any financing statement filed by it with respect to Pledgor in connection with this Pledge Agreement would become seriously misleading.

(f)            College Park Investments, LLC hereby covenants with and for the benefit of Lender that in the event that it acquires 100% of the direct or indirect equity interests in Orchard Housing, LLC or Klotz Road Associates, LLC or if it at any time it is not prohibited from pledging any direct or indirect interests in such entities, College Park Investments, LLC will pledge such equity interests to Lender on the same terms and conditions as set forth in this Agreement.

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6.             Cash Dividends; Voting Rights.  Unless an Event of Default shall have occurred and be continuing and the Lender shall have given notice to the Pledgors of the Lender’s intent to exercise its corresponding rights pursuant to Section 7 below, each Pledgor shall be permitted to receive all cash dividends paid in the normal course of business of the Issuers and consistent with past practice, to the extent permitted in the Loan Agreement, in respect of the Pledged Collateral and to exercise all voting, corporate (with respect to stock), member (with respect to LLC interests), and partnership (with respect to Partnership Interests) rights with respect to the Pledged Collateral; provided, however, that no vote shall be cast or corporate or member right exercised or other action taken which would impair the Pledged Collateral or which would be inconsistent with or result in any violation of any provision of the Loan Agreement, the Note, this Pledge Agreement or the other Loan Documents.

7.             Rights of the Lender.

(a)           All money Proceeds received by the Lender hereunder shall be held by the Lender in a Collateral Account.  All Proceeds while held by the Lender in a Collateral Account (or by the Pledgor in trust for the Lender) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 8(a).

(b)           If an Event of Default shall occur and be continuing and the Lender shall give notice of its intent to exercise such rights to Pledgor:  (i) the Lender shall have the right to receive any and all cash dividends or other cash distributions paid in respect of the Pledged Collateral and make application thereof to the Obligations in such order as it may determine, unless otherwise specifically provided in the Loan Documents, and (ii) at the request of the Lender, all shares of the Pledged Stock, all Pledged LLC Interests and all Pledged Partnership Interests shall be registered in the name of the Lender or its nominee, and the Lender or its nominee may during such period exercise (A) all voting, corporate or other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of any of the Issuers or otherwise (B) all members rights, powers and privileges with respect to the Pledged LLC Interests to the same extent as a member under the applicable Limited Liability Company Agreement; (C) all partnership rights, powers and privileges with respect to the Pledged Partnership Interests to the same extent as a member under the applicable Partnership Agreement; and (D) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Collateral as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or company structure of any of the Issuers, or upon the exercise by Pledgor or the Lender of any right, privilege or option pertaining to such shares or interests of the Pledged Collateral, and in connection therewith, the right to deposit and deliver any and all of the Pledged Collateral with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Lender shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

(c)           The rights of the Lender hereunder shall not be conditioned or contingent upon the pursuit by the Lender of any right or remedy against any of the Issuers, Borrower or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto.  The Lender shall not be liable for any failure to demand, collect or realize upon all or any part of the Pledged Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Pledged Collateral upon the request of the Pledgors or any other Person or to take any other action whatsoever with regard to the Pledged Collateral or any part thereof.

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8.             Remedies.

(a)           If an Event of Default shall have occurred and be continuing, at any time at the Lender’s election, except to the extent otherwise provided in the Loan Agreement, the Lender may apply all or any part of the Proceeds held in any Collateral Account in payment of the Obligations in such order as the Lender may elect.

(b)           If an Event of Default shall occur and be continuing, the Lender may exercise, in addition to all other rights and remedies granted in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code.  Without limiting the generality of the foregoing, the Lender, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Pledgor, the Borrower, the Issuers or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Pledged Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Pledged Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker’s board or office of the Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Lender or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Pledged Collateral so sold, free of any right or equity of redemption in any Pledgor, which right or equity is hereby waived or released.  The Lender shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Pledged Collateral or in any way relating to the Pledged Collateral or the rights of the Lender hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Lender may elect, and only after such application and after the payment by the Lender of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Lender account for the surplus, if any, to any Pledgor.  To the extent permitted by applicable law, each Pledgor waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by the Lender of any of its rights hereunder.  If any notice of a proposed sale or other disposition of Pledged Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.  Each Pledgor shall remain liable for any deficiency if the proceeds of any sale or other disposition of Pledged Collateral are insufficient to pay the Obligations and the reasonable and actual fees and disbursements of any attorneys employed by the Lender to collect such deficiency.

9.             Registration Rights; Private Sales.

(a)           If the Lender shall determine to exercise its right to sell any or all of the shares of Pledged Stock, any or all of the Pledged LLC Interests, or any or all of the Pledged Partnership Interests pursuant to Section 8 hereof, and if in the opinion of the Lender it is necessary or advisable to have the Pledged Stock and/or the Pledged LLC Interests and/or the Pledged Partnership Interests, or that portion thereof to be sold, registered under the provisions of the Securities Act, each Pledgor will cause any or all of the Issuers to (i) execute and deliver, and cause the officers of such Issuers to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Lender, necessary or advisable to register the shares of Pledged Stock, or that portion of them to be sold, under the provisions of the Securities Act, (ii) to use its best efforts to cause the registration

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statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the shares of Pledged Stock, or that portion thereof to be sold, and (iii) to make all amendments thereto and/or to the related prospectus which, in the opinion of the Lender, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto.  Each Pledgor agrees to cause the Issuers to comply with the provisions of the securities or “Blue Sky” laws of any and all jurisdictions which the Lender shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act.

(b)           Each Pledgor recognizes that the Lender may be unable to effect a public sale of any or all the Pledged Stock, any or all of the Pledged LLC Interests, or any or all of the Pledged Partnership Interests, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof.  Each Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Lender than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner.  The Lender shall be under no obligation to delay a sale of any of the Pledged Stock, any or all of the Pledged LLC Interests, or any or all of the Pledged Partnership Interests for the period of time necessary to permit the Issuers to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Issuers would agree to do so.

(c)           Each Pledgor further agrees to use its reasonable efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Pledged Stock pursuant to this Pledge Agreement valid and binding and in compliance with any and all other applicable Applicable Laws.  Each Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Lender, that the Lender has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against each Pledgor, and each Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Loan Agreement.

10.           Irrevocable Authorization and Instruction to Issuers.  Each Pledgor hereby authorizes and instructs each Issuer to comply with any instruction received by it from the Lender in writing that (a) states that an Event of Default has occurred and is continuing and (b) is otherwise in accordance with the terms of this Pledge Agreement, without any other or further instructions from any Pledgor, and each Pledgor agrees that each Issuer shall be fully protected in so complying.

11.           Agent’s Appointment as Attorney-in-Fact.

(a)           Each Pledgor hereby irrevocably constitutes and appoints the Lender and any officer or agent of the Lender, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of each Pledgor and in the name of each Pledgor or in the Lender’s own name, from time to time in the Lender’s discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Pledge Agreement, including, without limitation, any financing statements, endorsements, assignments or

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other instruments of transfer including those financing statements listing all assets of the Pledgor (other than College Park Investments LLC which cannot issue an all assets pledge) as the collateral in which the secured party named therein has a security interest.

(b)           Each Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 11(a).  All powers, authorizations and agencies contained in this Pledge Agreement are coupled with an interest and are irrevocable until this Pledge Agreement is terminated and the security interest created hereby is released.

12.           Limitation on Duties Regarding Pledged Collateral.  The Lender’s sole duty with respect to the custody, safekeeping and physical preservation of the Pledged Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Lender deals with similar securities and property for its own account, except that the Lender shall have no obligation to invest funds held in any Collateral Account and may hold the same as demand deposits.  Neither the Lender nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Pledged Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Pledged Collateral upon the request of the Pledgors or any other Person or to take any other action whatsoever with regard to the Pledged Collateral or any part thereof.

13.           Execution of Financing Statements.  Pursuant to Section 9-402 of the Code, each Pledgor hereby authorizes the Lender to file financing statements with respect to the Pledged Collateral without the signature of such Pledgor in such form and in such filing offices as the Lender reasonably determines appropriate to perfect the security interests of the Lender under this Pledge Agreement.  Each Pledgor hereby specifically authorizes Lender to file financing statements which list the collateral as being all assets of such pledgor (which is the named “Debtor” thereon).  A carbon, photographic or other reproduction of this Pledge Agreement shall be sufficient as a financing statement for filing in any jurisdiction.

14.           Powers Coupled with an Interest.  All authorizations and agencies herein contained with respect to the Pledged Collateral are irrevocable and powers coupled with an interest.

15.           Notices.  Notices, requests and demands to or upon the Lender or the Pledgors hereunder shall be effected in the manner set forth in Section 10.6 of the Loan Agreement.

16.           Severability.  Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

17.           Paragraph Headings.  The paragraph headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

18.           No Waiver; Cumulative Remedies.  The Lender shall not by any act (except by a written instrument pursuant to Section 19 hereof), delay, indulgence, omission or otherwise be deemed to

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have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising, on the part of the Lender, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Lender would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

19.           SPE Provisions.  Each of the Property Pledgors and Mezzanine Subsidiary Pledgors hereby represents, covenants and agrees as follows:

(a)           Each Property Pledgor and Mezzanine Subsidiary Pledgor has not and will not:

(i)      engage in any business or activity other than the ownership, operation and maintenance of the Mezzanine Collateral that it owns and activities incidental thereto;

(ii)     acquire or own any assets other than the Mezzanine Collateral that it owns on the date hereof;

(iii)    merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure;

(iv)    fail to observe all organizational formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the applicable Legal Requirements of the jurisdiction of its organization or formation, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

(v)     own any subsidiary, or make any investment in, any Person, except as contemplated hereby;

(vi)    commingle its assets with the assets of any other Person or permit any Affiliate or constituent party independent access to its bank accounts except that each such Pledgor may remit funds to an account held by the Borrower as to which the Borrower maintains accurate books and records as to the funds attributable to such Pledgor;

(vii)   incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Guaranteed Obligations;

(viii)  fail to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person; except that Pledgor’s financial position, assets, liabilities, net worth and operating results may be included in the consolidated financial statements of an Affiliate, provided that such consolidated financial statements contain a footnote indicating that Pledgor is a separate legal entity and that it maintains separate books and records;

(ix)    enter into any contract or agreement with any general partner, member, shareholder, principal, guarantor of the obligations of Pledgor, or any Affiliate of the foregoing,

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except upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties;

(x)     maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

(xi)    assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

(xii)   make any loans or advances to any Person;

(xiii)  fail to file its own tax returns or files a consolidated federal income tax return with any Person (unless prohibited or required, as the case may be, by applicable Legal Requirements);

(xiv)  fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

(xv)   fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(xvi)  if it is a partnership or limited liability company, without the unanimous written consent of all of its partners or members, as applicable, and the written consent of 100% of the managers of Pledgor, (a) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any Creditors Rights Laws, (b) seek or consent to the appointment of a receiver, liquidator or any similar official, (c) take any action that might cause such entity to become insolvent, or (d) make an assignment for the benefit of creditors;

(xvii) fail to allocate shared expenses (including, without limitation, shared office space and services performed by an employee of an Affiliate) among the Persons sharing such expenses and to use separate stationery, invoices and checks;

(xviii)  fail to remain solvent or pay its own liabilities (including, without limitation, salaries of its own employees) only from its own funds, provided that there are sufficient funds from the operation of the Property to do so;

(xix)   acquire obligations or securities of its partners, members, shareholders or other affiliates, as applicable;

(xx)    violate or cause to be violated the assumptions made with respect to Pledgor and its principals in any opinion letter pertaining to substantive consolidation delivered to Lender in connection with the Loan; or

(xxi)   fail to maintain a sufficient number of employees in light of its contemplated business operations.

(b)           If such Pledgor is a limited partnership or limited liability company, each general partner in the case of a limited partnership, or the managing member in the case of a limited liability company (each an “SPE Component Entity”) of such Pledgor, as applicable, shall be a corporation whose

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sole asset is its interest in such Pledgor.  Each SPE Component Entity (i) will at all times comply with each of the covenants, terms and provisions contained in Section 6.1(a)(iii) - (vi) and (viii) - (xxi), as if such representation, warranty or covenant was made directly by such SPE Component Entity; (ii) will not engage in any business or activity other than owning an interest in such Pledgor; (iii) will not acquire or own any assets other than its partnership, membership, or other equity interest in such Pledgor; (iv) will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation); and (v) will cause such Pledgor to comply with the provisions of this Section 3.6.  Prior to the withdrawal or the disassociation of any SPE Component Entity from such Pledgor, such Pledgor shall immediately appoint a new general partner or managing member whose articles of incorporation are substantially similar to those of such SPE Component Entity and, if an opinion letter pertaining to substantive consolidation was required at closing, deliver a new opinion letter acceptable to Lender and the Rating Agencies with respect to the new SPE Component Entity and its equity owners.  Notwithstanding the foregoing, to the extent such Pledgor is a single member Delaware limited liability company, so long as such Pledgor maintains such formation status, no SPE Component Entity shall be required.

(c)           In the event such Pledgor is a single-member Delaware limited liability company, the limited liability company agreement of such Pledgor (the “LLC Agreement”) shall provide that (i) upon the occurrence of any event that causes the sole member of such Pledgor (“Member”) to cease to be the member of such Pledgor (other than (A) upon an assignment by Member of all of its limited liability company interest in such Pledgor and the admission of the transferee, or (B) the resignation of Member and the admission of an additional member in either case in accordance with the terms of the Loan Documents and the LLC Agreement), any person acting as Independent Director of such Pledgor shall without any action of any other Person and simultaneously with the Member ceasing to be the member of such Pledgor, automatically be admitted to such Pledgor (“Special Member”) and shall continue such Pledgor without dissolution and (ii) Special Member may not resign from such Pledgor or transfer its rights as Special Member unless (A) a successor Special Member has been admitted to such Pledgor as Special Member in accordance with requirements of Delaware law and (B) such successor Special Member has also accepted its appointment as an Independent Director.  The LLC Agreement shall further provide that (i) Special Member shall automatically cease to be a member of such Pledgor upon the admission to such Pledgor of a substitute Member, (ii) Special Member shall be a member of such Pledgor that has no interest in the profits, losses and capital of such Pledgor and has no right to receive any distributions of such Pledgor assets, (iii) pursuant to Section 18-301 of the Delaware Limited Liability Company Act (the “Act”), Special Member shall not be required to make any capital contributions to such Pledgor and shall not receive a limited liability company interest in such Pledgor, (iv) Special Member, in its capacity as Special Member, may not bind such Pledgor, and (v) except as required by any mandatory provision of the Act, Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, such Pledgor, including, without limitation, the merger, consolidation or conversion of such Pledgor; provided, however, such prohibition shall not limit the obligations of Special Member, in its capacity as Independent Director, to vote on such matters required by the Loan Documents or the LLC Agreement.  In order to implement the admission to such Pledgor of Special Member, Special Member shall execute a counterpart to the LLC Agreement.  Prior to its admission to such Pledgor as Special Member, Special Member shall not be a member of such Pledgor.

(d)           Upon the occurrence of any event that causes the Member to cease to be a member of such Pledgor, to the fullest extent permitted by law, the personal representative of Member shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of Member in such Pledgor, agree in writing (i) to continue such Pledgor and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of such Pledgor, effective as of the occurrence of the event that terminated the continued membership of Member

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of such Pledgor in such Pledgor.  Any action initiated by or brought against Member or Special Member under any Creditors Rights Laws shall not cause Member or Special Member to cease to be a member of such Pledgor and upon the occurrence of such an event, the business of such Pledgor shall continue without dissolution.  The LLC Agreement shall provide that each of Member and Special Member waives any right it might have to agree in writing to dissolve such Pledgor upon the occurrence of any action initiated by or brought against Member or Special Member under any Creditors Rights Laws, or the occurrence of an event that causes Member or Special Member to cease to be a member of such Pledgor.

(e)           Notwithstanding anything to the contrary contained in this Agreement, Lender hereby acknowledges and agrees (i) that College Park Investments LLC shall be permitted to execute and deliver customary “non-recourse carveout” guarantees for the benefit of Bank of America, N.A. in connection with individual mortgage loans being made to each individual Mezzanine Asset Owner and (ii) that each Mezzanine Subsidiary Pledgor shall be permitted to cause or permit each Mezzanine Asset Owner to enter into a mortgage loan with Bank of America, N.A., provided, that, in the case of both (i) and (ii), the related mortgage loan obtained from Bank of America, N.A. shall not exceed the amounts set forth on Schedule II for the related Mezzanine Asset Owner.

20.           Waivers and Amendments; Successors and Assigns; Governing Law.  None of the terms or provisions of this Pledge Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgors, and the Lender, provided that any provision of this Pledge Agreement may be waived by the Lender in a letter or agreement executed by the Lender or by telex or facsimile transmission from the Lender.  This Pledge Agreement shall be binding upon the successors and assigns of each Pledgor and shall inure to the benefit of the Lender and their respective successors and assigns.  THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

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IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be duly executed and delivered as of the date first above written.

GMH COMMUNITIES, LP, a Delaware limited partnership
By:	GMH Communities GP Trust, a Delaware statutory trust, its general partner
	By	/s/ Joseph M. Macchione
		Name: Joseph M. Macchione
		Title: Vice President

[ALL SIGNATURE BLOCKS TO BE INSERTED UPON RECEIPT]

ACKNOWLEDGMENT AND CONSENT

The undersigned, the Issuers referred to in the foregoing Pledge Agreement, hereby acknowledge receipt of a copy thereof and agree to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it, including, without limitation, Section 10 of the Pledge Agreement.  The undersigned agree to notify the Lender promptly in writing of the occurrence of any of the events described in Section 5(a) of the Pledge Agreement.  The undersigned further agree that the terms of Section 9(c) of the Pledge Agreement shall apply to them, mutatis mutandis, with respect to all actions that may be required of them under or pursuant to or arising out of Section 9 of the Pledge Agreement.

SCHEDULE I to
Pledge Agreement

A.  DESCRIPTION OF PLEDGED STOCK

Name of Issuer	Class of Stock	Stock Certificate Number	Number of Shares
GMH Communities  TRS, Inc.	common stock	1	1,000
College Park Management  TRS, Inc.	common stock	2	1,000

B.  DESCRIPTION OF PLEDGED LLC INTERESTS

Name of Issuer*	Class of LLC Interest	Certificate Number.	Number of Interests
Savoy Village Associates, LLC	Regular	N/A	100	%
Croyden Avenue Associates, LLC	Regular	N/A	100	%
Monks Road Associates, LLC	Regular	N/A	100	%
South Carolina Associates, LLC	Regular	N/A	100	%
Reno Associates, LLC	Regular	N/A	100	%
Denton Associates, LLC	Regular	N/A	100	%
Lankford Drive Associates, LLC	Regular	N/A	100	%
Clarizz Boulevard Associates, LLC	Regular	N/A	100	%
Lakeside Associates, LLC	Regular	N/A	100	%
Urbana Associates, LLC	Regular	N/A	100	%
Red Mile Road Associates, LLC	Regular	N/A	100	%
Burbank Drive Associates III, LLC	Regular	N/A	100	%
Commons Drive Associates, LLC	Regular	N/A	100	%
Abbott Road Associates, LLC	Regular	N/A	100	%
Campus View Drive Associates, LLC	Regular	N/A	100	%
Alexander Road Associates, LLC	Regular	N/A	100	%
Brown Road Associates, LLC	Regular	N/A	100	%
Keller Boulevard Associates, LLC	Regular	N/A	100	%
Lankford Drive Associates II, LLC	Regular	N/A	100	%
Clarizz Boulevard Associates Intermediate, LLC	Regular	N/A	100	%
Lakeside Drive Associates Intermediate, LLC	Regular	N/A	100	%
Urbana Associates Intermediate, LLC	Regular	N/A	100	%
Red Mile Road Associates Intermediate, LLC	Regular	N/A	100	%
Burbank Drive Associates Intermediate III, LLC	Regular	N/A	100	%
Commons Drive Associates Intermediate, LLC	Regular	N/A	100	%
Abbott Road Associates Intermediate, LLC	Regular	N/A	100	%
Campus View Drive Associates Intermediate, LLC	Regular	N/A	100	%
Alexander Road Associates Intermediate, LLC	Regular	N/A	100	%
Brown Road Associates Intermediate, LLC	Regular	N/A	100	%
Keller Boulevard Associates Intermediate, LLC	Regular	N/A	100	%
Lankford Drive Associates Intermediate II, LLC	Regular	N/A	100	%
College Park Management, LLC, a Florida limited liability company	Regular	N/A	100	%

*All entities are organized under the laws of Delaware unless otherwise specified.

C.  DESCRIPTION OF PLEDGED PARTNERSHIP INTERESTS

Name of Issuer	Class of Partnership Interest	Certificate Number	Number of Interests
N/A	N/A	N/A	N/A

SCHEDULE II

Mezzanine Asset	Mezzanine Subsidiary Pledgor	Mezzanine Asset Owner	Guaranteed Obligations		Bank of America Mortgage Loan Amount
University Commons:   Bloomington, IN	Clarizz Boulevard Associates Intermediate, LLC	Clarizz Boulevard Associates, LLC	$	5,667152	$22,266,427
University Commons:   Athens, GA	Lakeside Associates Intermediate, LLC	Lakeside Associates, LLC	$	2,095,346	$	14,100,000
University Commons:   Urbana, IL	Urbana Associates Intermediate, LLC	Urbana Associates, LLC	$	2,642,732	$	16,575,000
University Commons:   Lexington, KY	Red Mile Road Associates Intermediate, LLC	Red Mile Road Associates, LLC	$	1,917,461	$	16,875,000
University Commons:   Baton Rouge, LA	Burbank Drive Associates Intermediate III, LLC	Burbank Drive Associates III, LLC	$	1,444,136	$	14,887,500
University Commons:   Eugene, OR	Commons Drive Associates Intermediate, LLC	Commons Drive Associates, LLC	$	1,468,027	$	16,148,310
University Commons:   East Lansing, MI	Abbott Road Associates Intermediate, LLC	Abbott Road Associates, LLC	$	3,252,900	$	17,850,000
University Commons:   Starkville, MS	Campus View Drive Associates Intermediate, LLC	Campus View Drive Associates, LLC	$	680,524	$	7,485,763
University Commons:   Cayce, SC	Alexander Road Associates Intermediate, LLC	Alexander Road Associates, LLC	$	2,354,558	$	16,200,000
University Commons:   Oxford, OH	Brown Road Associates Intermediate, LLC	Brown Road Associates, LLC	$	2,154,091	$	15,600,000
University Commons:   Tuscaloosa, AL	Keller Boulevard Associates Intermediate, LLC	Keller Boulevard Associates, LLC	$	3,075,000	$	15,375,000

EX-10.35

Exhibit 10.35

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”), dated as of October 2, 2006, is made by GMH COMMUNITIES, LP, a Delaware limited partnership (the “Borrower”), COLLEGE PARK MANAGEMENT, LLC, a Florida limited liability company, GMH COMMUNITIES SERVICES, INC., a Delaware corporation, GMH COMMUNITIES TRUST, a Maryland real estate investment trust, GMH COMMUNITIES TRS, INC., a Delaware corporation, GMH MILITARY HOUSING INVESTMENTS, LLC, a Delaware limited liability company, COLLEGE PARK MANAGEMENT TRS, INC., a Delaware corporation and GMH MILITARY HOUSING, LLC, a Delaware limited liability company (together with the Borrower, each a “Grantor”, collectively, the “Grantors”), in favor of WACHOVIA BANK, NATIONAL ASSOCIATION (the “Secured Party”).

RECITALS

Pursuant to the Loan Agreement, dated as of October 2, 2006 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), among the Borrower and Secured Party, the Secured Party has agreed to make a loan (consisting of an Initial Advance and Additional Advances to be made after the date hereof) (the “Loan”) to the Borrower upon the terms and subject to the conditions set forth therein.  It is a condition precedent to the obligation of the Secured Party to make the loan to the Borrower under the Loan Agreement that each Grantor shall have executed and delivered this Agreement to the Secured Party.

NOW, THEREFORE, in consideration of the premises and to induce the Secured Party to enter into the Loan Agreement and to induce the Secured Party to make the Loan to the Borrower under the Loan Agreement, each Grantor hereby agrees with the Secured Party, as follows:

1.     Defined Terms.  (a)  Unless otherwise defined herein, capitalized terms which are defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement; the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Account(s), Certificated Security, Chattel Paper, Documents, Equipment, Farm Products, General Intangibles, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Proceeds, Securities Account and Supporting Obligations; and the following terms shall have the following meanings:

“Account Control Agreement”: with respect to any Deposit Account, a control agreement in a form approved by the Lender, as amended, supplemented or otherwise modified from time to time.

“Code”: the Uniform Commercial Code as from time to time in effect in the State of New York.

“Collateral”: as defined in Section 2 of this Agreement (and shall not include any Excluded Collateral).

“Collateral Account”:  any collateral account established by the Secured Party as provided in Section 3(d) or 8.

“Copyright”: (a)  any copyright in any original work of authorship fixed in any tangible medium of expression (including, without limitation, any thereof referred to on Schedule V hereto),

including, without limitation, all databases, source codes, object codes and manuals, whether published or unpublished, whether now or hereafter existing, and whether in the United States or any other country, and all applications, registrations, renewals, extensions and recordings relating thereto filed in the United States Copyright Office or in any other governmental office or agency in the United States or any other country or political subdivision thereof, in each case in which any Grantor has any right, title or interest, whether as author, assignee, transferee or otherwise, and all other rights which any Grantor presently has or hereafter acquires pursuant to any Copyright License relating to any such copyright, including, without limitation, copyright assignments, and exclusive and nonexclusive licenses, and (b) all right, title and interest of any Grantor in all physical materials embodying any work with respect to which any Grantor owns or holds rights in any Copyright or Copyright License.

“Copyright License”: (a) any agreement, written or oral, naming any Grantor as licensor or licensee, granting any right in or to any Copyright or copyright registration in the United States or any foreign country (including, without limitation, any thereof referred to on Schedule V hereto) or (b) any and all present and future agreements, including, without limitation, assignments and consents, as any such agreements may from time to time be amended or supplemented, pursuant to which any Grantor now has or hereafter acquires any direct or beneficial interest in any Copyright, or is a grantor of rights to any third party with respect to any copyright, whether as a party to any such agreement or as an assignee of any rights under any such agreement (including, without limitation, any thereof referred to on Schedule V hereto) excluding, however, non-exclusive computer software licenses.

“Deposit Account”: a “deposit account” as defined in the Uniform Commercial Code of any applicable jurisdiction and, in any event, including without limitation any demand, time, savings, passbook or like account maintained with any depositary institution.

“Excess Cash Flow Receivables”:  all of Borrower’s right, title and interest in all amounts to be paid, and all amounts paid, from time to time to any Grantor pursuant to the Excess Cash Flow Direction Letter.

“Excluded Assets”: any asset of any Grantor described in clauses (i) through (xx) of the definition of “Collateral” to the extent that the grant of a security interest therein pursuant to this Agreement (i) is prohibited by any contract, agreement, instrument or indenture in existence as of October 2, 2006 of any Grantor or any Subsidiary of such Grantor to the extent such prohibition is applicable to such Grantor, (ii) would terminate any contract, agreement, instrument or indenture of the Grantor or its Subsidiaries or give any other party thereto or to any such contract, agreement, instrument or indenture the right to terminate such party’s obligations under any such contract, agreement, instrument or indenture, (iii) is permitted only with the consent of any other Person, which consent has not been obtained, or (iv) would result in, or require, the creation of any Lien on any portion of the Collateral pursuant to the terms of any contract, agreement, instrument or indenture of such Grantor, but only, in the case of each of subclauses (i) through (iv), to the extent that any such prohibition, limitation or restriction would be effective under applicable law (including, without limitation, as provided under Sections 9-406 and 9-408 of the Code).

“GMH Facility Account”: a Deposit Account established by each Grantor in accordance with the requirements of this Agreement with respect to which the applicable Grantor(s) shall execute and deliver, and cause to be delivered, an Account Control Agreement.

“Patent License”: any agreement, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered by a Patent, and all rights of any Grantor under such agreement.

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“Patents”: (a) all letters patent of the United States or any other country, including patents, design patents and utility models, and all registrations and recordings thereof, (b) all applications for letters patent of the United States or any other country and (c) all reissues, extensions, divisions, continuations and continuations-in-part thereof, and the inventions disclosed or claimed therein, including the right to make, sell and/or use the inventions disclosed or claimed therein; including, without limitation.

“Receivable”: any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account), including, without limitation, all Excess Cash Flow Receivables.

“Trademark License”: any agreement, written or oral, providing for the grant by or to any Grantor of any right to use any Trademark.

“Trademarks”: (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, all prints or labels on which any of the foregoing appear, and all designs and general intangibles of a like nature, and the goodwill associated therewith or symbolized thereby, and all other assets, rights and interests that uniquely embody such goodwill, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, or otherwise, and (b) all extensions or renewals thereof.

(b)           The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule. Annex, and Exhibit references are to this Agreement unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

2.             Grant of Security Interest.  As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, each Grantor hereby grants to the Secured Party a security interest in all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the “Collateral”):

(i)	all Receivable;
(ii)	all Accounts;
(iii)	all Chattel Paper;
(iv)	all Copyrights;
(v)	all Copyright Licenses;
(vi)	all Deposit Accounts;
(vii)	all Documents;
(viii)	all Equipment;
(ix)	all General Intangibles;
(x)	all Instruments;
(xi)	all Inventory;
(xii)	all Investment Property;
(xiii)	all Letter of Credit Rights;
(xiv)	all Patents;

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(xv)	all Patent Licenses;
(xvi)	all Securities Accounts, and all Investment Property held therein or credited thereto;
(xvii)	all Trademarks;
(xviii)	all Trademark Licenses;
(xix)	all Goods and other property not otherwise described above;
(xx)	all books and records pertaining to the Collateral;
(xxi)	to the extent not otherwise included, all Proceeds and products of any and all of the foregoing, all Supporting Obligations in respect of any of the foregoing, and all collateral security and guarantees given by any Person with respect to any of the foregoing,

provided, that the Collateral shall not include the Excluded Assets.

3.             Certain Matters Respecting Receivables.

(a)             Grantors Remain Liable under Receivables.  Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Receivable.  Secured Party shall not have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Secured Party of any payment relating to such Receivable pursuant hereto, nor shall the Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(b)           Communication with and Notice to Receivable Obligors. The Secured Party may at any time communicate with obligors under the Receivables to verify with them to the Secured Party’s satisfaction the existence, amount and terms of any Receivables. Upon the request of the Secured Party at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify account debtors on the Receivables that the Receivables have been assigned to the Secured Party and that payments in respect thereof shall be made directly to the Secured Party.

(c)           Analysis of Receivables.  The Secured Party shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such reasonable assistance and information as the Secured Party may require in connection therewith.  Not more than once per calendar year (or otherwise during the occurrence of an Event of Default), upon the Secured Party’s request and at the expense of the Grantors, each Grantor shall cause independent public accountants or others satisfactory to the Secured Party to furnish to the Secured Party reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables.  The Secured Party may in its own name or in the name of others communicate with account debtors on the Receivables to verify with them to its satisfaction the existence, amount and terms of any Receivables.

(d)           Collections on Receivables.  Except as provided in clause (e) of this Section 3, the Secured Party hereby authorizes each Grantor to collect the Receivables.  If required by the Secured Party at any time when an Event of Default shall have occurred and be continuing, any payments of Receivables, when collected by any Grantor, shall be forthwith (and, in any event, within two Business

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Days) deposited by such Grantor in the exact form received, duly endorsed by such Grantor to the Secured Party if required, in a special collateral account maintained by the Secured Party, subject to withdrawal by the Secured Party only, as hereinafter provided, and, until so turned over, shall be held by such Grantor in trust for the Secured Party, segregated from other funds of the Grantors.  Upon request, each Grantor shall provide a report identifying in reasonable detail each deposit of any such Proceeds, including the nature and source of the payments included in the deposit.  All Proceeds constituting collections of Receivables while held by the Secured Party (or by any Grantor in trust for the Secured Party) shall continue to be collateral security for all of the Obligations and shall not constitute payment thereof until applied as hereinafter provided.  At such intervals as may be agreed upon by the Grantors and the Secured Party, or, if an Event of Default shall have occurred and be continuing, at any time at the Secured Party’s election, the Secured Party shall apply all or any part of the funds on deposit in said Collateral Account on account of the Obligations in such order as the Secured Party may elect, and any part of such funds which the Secured Party elects not so to apply and deems not required as collateral security for the Obligations shall be paid over from time to time by the Secured Party to the Grantors or to whomsoever may be lawfully entitled to receive the same.  At the Secured Party’s request, each Grantor shall deliver to the Secured Party all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts. At any time during the continuance of an Event of Default, each Grantor will cooperate with the Secured Party to establish a system of lockbox accounts, under the sole dominion and control of the Secured Party, into which all Receivables shall be paid and from which all collected funds will be transferred to a Collateral Account.

(e)           Excess Cash Flow Receivables.  Upon the occurrence of an Event of Default, the Secured Party shall establish the GMH Facility Account.  The GMH Facility Account shall be in the name of the Secured Party, shall be subject to the sole dominion and control of the Secured Party, and no Grantor shall have any right of withdrawal therefrom.  On or prior to the Closing Date, the Borrower and each applicable Subsidiary shall have executed and delivered the Excess Cash Flow Direction Letter.  Pursuant to the Excess Cash Flow Direction Letter, all payments on Excess Cash Flow Receivables (which shall occur through a series of distributions as more particularly described in the Excess Cash Flow Direction Letter) shall, from and after the occurrence of an Event of Default, be made by wire transfer directly to the GMH Facility Account.  The Secured Party shall retain all proceeds of the Excess Cash Flow Receivables in the GMH Facility Account and shall be entitled to apply them to the Obligations (whether matured or unmatured) in such manner as the Secured Party may elect.

4.             Representations and Warranties.  Each Grantor hereby represents and warrants that:

(a)           Title; No Other Liens.  Except for the Liens granted to the Secured Party for the ratable benefit of the Secured Party pursuant to this Agreement, and the other Liens permitted to exist on the Collateral pursuant to the Loan Agreement, each Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others.  No security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of the Secured Party, for the ratable benefit of the Secured Party, pursuant to this Agreement or as may be permitted pursuant to the Loan Agreement.

(b)           Perfected First Priority Liens.  The Liens granted pursuant to this Agreement will constitute perfected Liens in favor of the Secured Party in the Receivables and in the Collateral as collateral security for the Obligations, (i) with respect to all Collateral, except as provided in clauses (ii) and (iii) below, when financing statements have been filed in the offices in the jurisdictions where the Grantor is organized as set forth on Schedule I, (ii) solely with respect to Collateral constituting Investment Property evidenced by certificates, all of which are listed on Schedule II, if any, when such

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certificates have been delivered to the Lender, and (iii) solely with respect to Collateral consisting of the Deposit Accounts listed in Schedule III, if any, when each such Deposit Account becomes subject to the applicable Account Control Agreement, which Liens are prior to all other Liens on the Collateral created by the Grantors and in existence on the date hereof and which are enforceable as such against all creditors of and purchasers from any Grantor and against any owner or purchaser of the real property where any of the Equipment or Inventory is located and any present or future creditor obtaining a Lien on such real property.  To the extent the same constitutes Collateral, each Grantor shall cause each of the Deposit Accounts and Security Accounts set forth on Schedule III, if any, to be subject to an Account Control Agreement on or before October       , 2006.

(c)           Receivables.  The amount represented by each Grantor to the Secured Party from time to time as owing by each obligor or by all obligors in respect of the Receivables will at such time be the correct amount actually owing by such obligor or obligors thereunder.  No amount payable to any Grantor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Secured Party.  The place where each Grantor keeps its records concerning the Receivables is specified for such Grantor on Schedule I.

(d)           Inventory and Equipment.  The Inventory and the Equipment are kept at the locations listed on Schedule IV hereto.

(e)           Chief Executive Office.  Each Grantor’s chief executive office and chief place of business is, and for the four (4) months preceding the date hereof has been, located at the place specified for such Grantor on Schedule I.

(f)            Jurisdiction of Organization.  Each Grantor is a “registered organization” as defined in the Code and is organized as the type of entity, as under the laws of the jurisdiction, specified for such Grantor on Schedule I.

(g)           Name.  (i) The exact legal name of each Grantor is as specified for such Grantor on Schedule I; and (ii) no Grantor has done business under a previous name, assumed name or trade name, except as specified for such Grantor on Schedule I.

(h)           Farm Products.  None of the Collateral constitutes, or is the Proceeds of, Farm Products.

(i)            Insurance Policies.  None of the Collateral constitutes an interest or claim in or under any policy of insurance or contract for annuity, except to the extent the same constitutes Proceeds.

(j)            Copyrights, Patents and Trademarks.  Schedule V hereto includes all Copyrights and Copyright Licenses owned by each Grantor in its own name as of the date hereof.  Schedule VI hereto includes all Patents and Patent Licenses owned by each Grantor in its own name as of the date hereof.  Schedule VII hereto includes all Trademarks and Trademark Licenses owned by each Grantor in its own name as of the date hereof.  To the best of each Grantor’s knowledge, each Copyright, Patent and Trademark is valid, subsisting, unexpired, enforceable and has not been abandoned.  Except as set forth in Schedules V, VI or VII, none of such Copyrights, Patents and Trademarks is the subject of any licensing or franchise agreement.  No holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity of any Copyright, Patent or Trademark.  Except as disclosed on Schedules V, VI or VII, no action or proceeding is pending (i) seeking to limit, cancel or question the validity of any Copyright, Patent or Trademark, or (ii) which, if adversely determined, would have a material adverse effect on the value of any Copyright, Patent or Trademark.

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(k)           Governmental Obligors.  None of the obligors on any Receivables is a Governmental Authority.

(l)            Deposit Accounts and Securities Accounts.  All Deposit Accounts and Securities Accounts with respect to each Grantor are listed on Schedule III, including the institution at which such Deposit Account or Securities Account is established, the purpose thereof, the name thereon, and the account number thereof.  Each Grantor agrees that at no time after the date that is fifteen (15) days after the Closing Date, may the aggregate amount of funds held in such Deposit Accounts of the Grantors and Investment Property held in Securities Accounts which are not subject to Account Control Agreements exceed $100,000; provided that this requirement shall not apply to amounts held in the payroll account to the extent such amounts are held therein solely for the purposes of disbursing payroll in a manner consistent with past practices (it being understood that any cash and/or Investment Property held therein in excess of the amount required shall be transferred to a Deposit Account and/or Securities Account which is subject to an Account Control Agreement).  Each Grantor agrees that it will not transfer assets out of any Securities Account, or transfer any Securities Account to another securities intermediary, unless such Grantor, the Lender, and the substitute securities intermediary have entered into an Account Control Agreement.  No arrangement contemplated hereby or by any Account Control Agreement in respect of any Securities Account or other Investment Property shall be modified by any Grantor without the prior written consent of the Lender.  Upon the occurrence and during the continuance of an Event of Default, the Lender may notify any securities intermediary to liquidate the applicable Securities Account or any related Investment Property maintained or held thereby and remit the proceeds thereof to an account specified by the Lender (including any Collateral Account).

Each of the foregoing representations and warranties set forth in this Section 4 apply only to the extent that they are applicable to Collateral.

5.             Covenants.  Each Grantor covenants and agrees with the Secured Party that, from and after the date of this Agreement until the Obligations are paid in full:

(a)           Maintenance of Perfected Security Interests; Further Documentation; Pledge of Instruments and Chattel Paper.  Each Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4(b) hereof and shall defend such security interest against the claims and demands of all Persons whomsoever.  At any time and from time to time, upon the written request of the Secured Party, and at the sole expense of the Grantors, each Grantor will promptly and duly execute and deliver such further instruments and documents and take such further action as the Secured Party may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Liens created hereby and (ii) in the case of Investment Property, Deposit Accounts and any other relevant Collateral, taking any actions (including, without limitation, entering into, and using its best efforts to cause any relevant third party to enter into, one or more control agreements) necessary to enable the Secured Party to obtain “control” (within the meaning of the applicable Uniform Commercial Code) with respect thereto.  Each Grantor also hereby authorizes the Secured Party to file any such financing or continuation statement without the signature of the Grantors to the extent permitted by applicable law.  Any such financing statement may, at the option of the Secured Party, describe the property covered thereby and “all assets” or “all personal property” of such Grantor, or may use a similar description.  A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction.  If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Chattel Paper or Certified Security, such Instrument, Chattel Paper or Certified Security

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shall be immediately delivered to the Lender, duly endorsed in a manner satisfactory to the Lender, to be held as Collateral pursuant to this Agreement.

(b)           Indemnification.  Each Grantor agrees, jointly and severally, to pay, and to save the Secured Party harmless from, any and all liabilities, costs and expenses (including, without limitation, reasonable legal fees and expenses actually incurred) (i) with respect to, or resulting from, any delay in paying, any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral, (ii) with respect to, or resulting from, any delay in complying with any Requirement of Law applicable to any of the Collateral or (iii) in connection with any of the transactions contemplated by this Agreement.  In any suit, proceeding or action brought by the Secured Party under any Receivable for any sum owing thereunder, or to enforce any provisions of any Receivable, each Grantor will save, indemnify and keep the Secured Party harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by any Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from any Grantor.

(c)           Maintenance of Records.  Each Grantor will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Accounts.  To the extent requested by the Secured Party, each Grantor will mark its books and records pertaining to the Collateral to evidence this Agreement and the security interests granted hereby.  Upon the occurrence and during the continuance of an Event of Default, each Grantor shall turn over any books and records pertaining to the Collateral to the Secured Party or to its representatives during normal business hours at the request of the Secured Party.

(d)           Right of Inspection.  Upon reasonable notice, the Secured Party shall at all times have full and free access during normal business hours to all the books, correspondence and records of each Grantor, and the Secured Party or its respective representatives may examine the same, take extracts therefrom and make photocopies thereof (subject tot eh terms of Section 10.24 of the Loan Agreement), and each Grantor agrees to render to the Secured Party, at the Grantors’ cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto.  The Secured Party and its representatives shall, upon reasonable notice, also have the right during normal business hours to enter into and upon any premises where any of the Inventory or Equipment is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein.

(e)           Compliance with Laws, etc.  Each Grantor will comply in all material respects with all Applicable Laws applicable to the Collateral or any part thereof or to the operation of such Grantor’s business; provided, however, that each Grantor may contest any Applicable Laws in any reasonable manner which shall not, in the reasonable opinion of the Secured Party, adversely affect the Secured Party’s rights or the priority of its Liens on the Collateral.

(f)            Compliance with Terms of Contracts, etc.  Each Grantor will perform and comply in all material respects with all its obligations under all its contractual obligations relating to the Collateral.

(g)           Payment of Obligations.  Each Grantor will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of its income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if (i) the validity thereof is being contested in good faith by appropriate proceedings, (ii) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of the Collateral or any interest

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therein and (iii) such charge is adequately reserved against on such Grantor’s books in accordance with GAAP.

(h)           Limitation on Liens on Collateral.  No Grantor will create, incur or permit to exist, will defend the Collateral against, and will take such other action as is necessary to remove, any Lien or claim on or to the Collateral, other than the liens created hereby and other than as permitted pursuant to the Loan Agreement, and will defend the right, title and interest of the Secured Party in and to any of the Collateral against the claims and demands of all Persons whomsoever.

(i)            Limitations on Dispositions of Collateral.  No Grantor will sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so except for sales of Inventory in the ordinary course of its business or as otherwise permitted by the Loan Agreement.

(j)            Limitations on Modifications of Agreements Giving Rise to Receivables; Exercise of Rights; Notices.  No Grantor will (i) other than in the ordinary course of business as generally conducted by such Grantor over a period of time, amend, modify, terminate or waive any provision of any agreement giving rise to a Receivable (including, in respect of the Excess Cash Flow Receivables, any related mortgage loan documents) in any manner which could reasonably be expected to materially adversely affect the value of such Receivable as Collateral, (ii) other than in the ordinary course of business as generally conducted by such Grantor over a period of time, fail to exercise promptly and diligently each and every material right which it may have under each agreement giving rise to a Receivable (other than any right of termination) or (iii) fail to deliver to the Secured Party a copy of each material demand, notice or document received by it relating in any way to any agreement giving rise to a material Receivable.

(k)           Limitations on Discounts, Compromises, Extensions of Receivables.  Other than in the ordinary course of business consistent with its past practice, no Grantor will (i) grant any extension of the time of payment of any Receivable, (ii) compromise, compound or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, or (iv) allow any credit or discount whatsoever on any Receivable.

(l)            Maintenance of Equipment.  Each Grantor will maintain each item of Equipment in good operating condition, ordinary wear and tear and immaterial impairments of value and damage by the elements excepted, and will provide all maintenance, service and repairs necessary for such purpose, except that such Grantor’s obligations pursuant to this Section 5(l) shall not extend to obsolete Equipment.

(m)          Maintenance of Insurance.  Each Grantor will maintain, with financially sound and reputable companies, insurance policies (i) insuring the Inventory and Equipment against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Secured Party in amounts comparable to amounts of insurance coverage obtained by similar businesses of similar size acting prudently and (ii) insuring each Grantor and the Secured Party against liability for personal injury and property damage relating to such Inventory and Equipment, such policies to be in such form and amounts and having such coverage as shall be comparable to forms, amounts and coverage, respectively, obtained by similar businesses of similar size acting prudently, with losses payable to any Grantor and the Secured Party as its interest may appear or, in the case of liability insurance, showing the Secured Party as additional insured parties.  Each Grantor shall deliver to the Secured Party a report of a reputable insurance broker with respect to such insurance at the beginning of each calendar year and such supplemental reports with respect thereto as the Secured Party may from time to time reasonably request.

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(n)           Further Identification of Collateral.  Each Grantor will furnish to the Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail.

(o)           Notices.  Each Grantor will advise the Secured Party promptly, in reasonable detail, at its address set forth in the Loan Agreement, (i) of any Lien (other than Liens created hereby or permitted under the Loan Agreement) on, or claim asserted against, any of the Collateral and (ii) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the Liens created hereunder.

(p)           Changes in Locations, Name, etc.  No Grantor will, without giving the Secured Party reasonable advance notice of the same, (i) change the location of its jurisdiction of organization, as defined in the Uniform Commercial Code of any relevant jurisdiction from that specified in Section 4(f) or remove its books and records concerning the Receivables from the location specified in Section 4(c), (ii) permit any of the Inventory or Equipment to be kept at a location other than those listed on Schedule IV hereto, (iii) change its name, identity or corporate or limited liability company structure or (iv) reorganize under the laws of another jurisdiction or as a different type of entity.

(q)           Patents, Trademarks and Copyrights.

(i)            Each Grantor (either itself or through licensees) will (i) continue to use each in a manner sufficient to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) employ such Trademark with the appropriate notice of registration, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Secured Party, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated.

(ii)           No Grantor will do any act, or omit to do any act, whereby any material Patent may become abandoned or dedicated.

(iii)          Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve such Grantor’s material rights under all applicable copyright laws.

(iv)          Each Grantor will notify the Secured Party immediately if it knows, or has reason to know, that any material Patent, Trademark or Copyright or any application or registration relating to any thereof may become abandoned, lost or dedicated, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal or similar office in any country) regarding such Grantor’s ownership of any Patent, Trademark or Copyright or its right to register the same or to keep and maintain the same.

(v)           Whenever any Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof, or shall file an application for registration of any Copyright with

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the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Secured Party within fifteen (15) Business Days.

(vi)          Each Grantor shall from time to time execute and deliver any and all agreements, instruments, documents, and papers as the Secured Party may reasonably request (including, without limitation, one or more Notice of Security Interest in Patents, one or more Memorandum of Security Agreement - Trademarks and one or more Copyright Security Agreements — Short Form, in each case in a form reasonably requested by Secured Party and with appropriate completions and schedules) to evidence the Secured Party’s security interest for the ratable benefit of the Secured Party in any Patent, Trademark or Copyright and the goodwill and General Intangibles of the Grantors relating thereto or represented thereby, and each Grantor hereby constitutes the Secured Party its attorney-in-fact to execute and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, such power being coupled with an interest is irrevocable until the Obligations are paid in full.

(vii)         Each Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office or the United States Copyright Office, or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the Patents, Trademarks and Copyrights, including, without limitation, timely filing of applications for renewal, affidavits of use and affidavits of incontestability and payment of maintenance fees.

(viii)        In the event that any material Patent, Trademark or Copyright included in the Collateral is infringed, misappropriated or diluted by a third party, each Grantor shall promptly notify the Lender after it learns thereof and, at the Grantors’ sole expense, shall, unless the Grantors shall reasonably determine that such Patent, Trademark or Copyright is of negligible economic value to the Grantors, promptly sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution, or take such other actions as the Grantors shall reasonably deem appropriate under the circumstances to protect such Patent, Trademark or Copyright.

(ix)           Upon and during the continuance of an Event of Default and at the reasonable request of the Secured Party, each Grantor shall use its reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor’s rights, title and interest thereunder to the Secured Party or its designee.

(r)    Inventory.  None of the Inventory of any Grantor shall be evidenced by a warehouse receipt.

6.             Agent’s Appointment as Attorney-in-Fact.

(a)           Powers.  Each Grantor hereby irrevocably constitutes and appoints the Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of each Grantor and in the name of each Grantor or in its own name, from time to time in the Secured Party’s discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this

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Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Secured Party the power and right, on behalf of each Grantor, without notice to or assent by any Grantor, to do the following:

(i)            in the name of each Grantor or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account, Instrument, Chattel Paper, General Intangible or Excess Cash Flow Receivable or with respect to any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Secured Party for the purpose of collecting any and all such moneys due under any Account, Instrument, Chattel Paper, General Intangible or Excess Cash Flow Receivable or with respect to any other Collateral whenever payable;

(ii)           to pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, to effect any repairs or any insurance called for by the terms of this Agreement and to pay all or any part of the premiums therefor and the costs thereof;

(iii)          in the case of any Patent, Trademark or Copyright, to execute and deliver any and all agreements, instruments, documents and papers as the Lender may request to evidence the Lenders’ security interest in such Patent, Trademark or Copyright and the goodwill and general intangibles of the Grantors relating thereto or represented thereby;

(iv)          to execute, in connection with any sale provided for in Section 9 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and

(v)           (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Secured Party or as the Secured Party shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against any Grantor with respect to any Collateral; (F) to settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, to give such discharges or releases as the Secured Party may deem appropriate; and (G) to assign any Patent or Trademark (along with the goodwill of the business to which any such Trademark pertains), throughout the world for such term or terms, on such conditions, and in such matter, as the Lender shall in its reasonable discretion determine; and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes, and to do, at the Secured Party’s option and the Grantors’ expense, at any time, or from time to time, all acts and things which the Secured Party deems necessary to protect, preserve or realize upon the Collateral and the Secured Party’s, Liens thereon for the ratable benefit of the Secured Party and to effect the intent of this Agreement, all as fully and effectively as the Grantors might do.

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Anything in this Section 6(a) to the contrary notwithstanding, the Secured Party agrees that it will not exercise any rights under the power of attorney provided for in this Section unless an Event of Default has occurred and is continuing.

Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  This power of attorney is a power coupled with an interest and is irrevocable.

(b)           No Duty on Secured Party’s Part.  The powers conferred on the Secured Party hereunder are solely to protect the Secured Party’s interests in the Collateral and shall not impose any duty upon the Secured Party to exercise any such powers.  Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

7.             Performance by Secured Party of Grantors’ Obligations.  If any Grantor fails to perform or comply with any of its agreements contained herein, the Secured Party, at its option, but without any obligation to do so, may itself, upon prior written notice to the Guarantors (which notice shall not be required during the continuance of an Event of Default), perform or comply, or otherwise cause performance or compliance, with such agreement.  The actual out-of-pocket expenses of the Secured Party incurred in connection with such performance or compliance, together with interest thereon at a rate equal to the amount set forth in the Loan Agreement, shall be payable, jointly and severally, by the Grantors to the Secured Party on demand and shall constitute Obligations secured hereby.

8.             Proceeds.

(a)           In addition to the rights of the Secured Party specified in Section 3(d) and (e) with respect to payments of Receivables, it is agreed that during an Event of Default all Proceeds received by any Grantor consisting of cash, checks and other near-cash items shall be held in an account subject to an Account Control Agreement, or at Secured Party’s request, be held by the Grantors in trust for the Secured Party, segregated from other funds of the Grantors, and shall, forthwith upon receipt by any Grantor, be turned over to the Secured Party in the exact form received by such Grantor (duly endorsed by such Grantor to the Secured Party if required), and held by the Secured Party in a Collateral Account maintained under the sole dominion and control of the Secured Party.  Any and all such Proceeds held by the Secured Party in a Collateral Account (or by any Grantor in trust for the Secured Party) shall continue to be held as collateral security for the Obligations and shall not constitute payment thereof until applied as provided in this Section.

(b)           If an Event of Default shall have occurred and be continuing, at any time at the Secured Party’s election, the Secured Party may apply all or any part of the Proceeds constituting Collateral, whether or not held in any Collateral Account, and any Proceeds of the Pledge Agreement, the Guarantee or any other Loan Document, or otherwise received by the Secured Party, against the Obligations (whether matured or unmatured), such application to bein such order as the Secured Party shall elect, unless otherwise provided in the Loan Documents.  Any balance of such Proceeds remaining after the Obligations shall have been paid in full and the Loan Agreement terminated shall be paid over to the Grantors or to whomsoever may be lawfully entitled to receive the same.

9.             Remedies.  If an Event of Default shall occur and be continuing, the Secured Party, may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code.  Without limiting the generality of the foregoing, the Secured Party, without demand of performance or other demand, presentment, protest, advertisement or notice of any

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kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk.  The Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived or released.  Each Grantor further agrees, at the Secured Party’s request, to assemble the Collateral and make it available to the Secured Party at places which the Secured Party shall reasonably select, whether at any Grantor’s premises or elsewhere.  The Secured Party shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable and actual costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Secured Party arising out of the exercise by the Secured Party hereunder, including, without limitation, reasonable and actual attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Secured Party may elect, unless otherwise provided in the Loan Documents, and only after such application and after the payment by the Secured Party of any other amount required by any provision of law, including, without limitation, Section 9-615 of the Code, need the Secured Party account for the surplus, if any, to the Grantors.  To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Secured Party arising out of the exercise by the Secured Party of any of its rights hereunder.  If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.  Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements of any attorneys employed by the Secured Party to collect such deficiency.

10.           Grant of License to Use Patent, Trademark and Copyright Collateral.  For the purpose of enabling the Secured Party to exercise rights and remedies under Section 9 hereof at such time as the Secured Party shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Secured Party an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, license or sublicense any of the Copyrights, Patents and Trademarks, now owned or hereafter acquired by any Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored.  The use of such license by the Secured Party shall be exercised, at the option of the Secured Party for any purpose appropriate in connection with the exercise of remedies hereunder, only upon the occurrence and during the continuance of an Event of Default; provided that any license, sublicense or other transaction entered into by the Secured Party in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure of an Event of Default.  The Secured Party agrees to apply the net proceeds received from any license as provided in Section 8 hereof.

11.           Limitation on Duties Regarding Presentation of Collateral.  The Secured Party’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Secured Party deals with similar property for its own account. Neither the Secured Party nor any of its directors, officers, employees, agents or advisors shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any

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other action whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Secured Party hereunder are solely to protect the Secured Party’s interests in the Collateral and shall not impose any duty upon the Secured Party or any Secured Party to exercise any such powers.  The Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees, agents or advisors shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

12.           Powers Coupled with an Interest.  All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

13.           Execution of Financing Statements.  Pursuant to Section 9-402 of the Code, each Grantor hereby authorizes the Secured Party to file financing statements with respect to the Collateral without the signature of such Grantor in such form and in such filing offices as the Secured Party reasonably determined appropriate to perfect the security interests of the Secured Party under this Agreement.  A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction.

14.           Notices.  Notices, requests and demands to or upon the Secured Party or any Grantor hereunder shall be effected in the manner set forth in Section 10.6 of the Loan Agreement.

15.           Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

16.           Paragraph Headings.  The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

17.           No Waiver; Cumulative Remedies. Secured Party shall not by any act (except by a written instrument pursuant to Section 18 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof.  No failure to exercise, nor any delay in exercising, on the part of the Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  A waiver by the Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Secured Party would otherwise have on any future occasion.  The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

18.           Waivers and Amendments; Successors and Assigns; Governing Law.  None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Grantor and the Secured Party, provided that any provision of this Agreement may be waived by the Secured Party in a written instrument executed by the Secured Party.  This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Secured Party, its successors and assigns.  This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

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[SIGNATURE PAGES IMMEDIATELY FOLLOW]

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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered as of the date first above written.

	GRANTOR:
	GMH COMMUNITIES, LP, a Delaware limited partnership
By:	/s/ Joseph Macchione
	Name:	Joseph Macchione
	Title:	Vice President & Secretary

	COLLEGE PARK MANAGEMENT LLC, a
	Florida limited liability company
By:	/s/ Joseph  Macchione
	Name:	John Ferer
	Title:	Assistant Vice President

	COLLEGE PARK MANAGEMENT TRS, INC.,
	a Delaware Corporation
By:	/s/ John Ferer
	Name:	John Ferer
	Title:	Assistant Vice President

	GMH MILITARY HOUSING, LLC, a Delaware
	limited liability company
By:	/s/ John Ferer
	Name:	John Ferer
	Title:	Assistant Vice President

	GMH MILITARY HOUSING INVESTMENTS
	LLC, a Delaware limited liability
By:	/s/ John Ferer
	Name:	John Ferer
	Title:	Assistant Vice President

	GMH COMMUNITIES TRS, INC., a Delaware
	corporation
By:	/s/ Joseph Macchione
	Name:	Joseph Macchione
	Title:	Vice President

	GMH COMMUNITIES TRUST, a Maryland real
	estate investment trust
By:	/s/ Joseph Macchione
	Name:	Joseph Macchione
	Title:	Executive Vice President & Secretary

	GMH COMMUNITIES SERVICES, INC., a
	Delaware corporation
By:	/s/ Joseph Macchione
	Name:	Joseph Macchione
	Title:	Vice President

Schedule I

NAMES, FORM OF ORGANIZATION AND LOCATION OF GRANTORS

Legal Name: GMH Communities, LP
Type of Organization: Limited Partnership
State of Incorporation/Organization:  Delaware
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Legal Name: College Park Management, LLC
Type of Organization: Limited Liability Company
State of Incorporation/Organization: Florida
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Legal Name: GMH Communities Services, Inc.
Type of Organization: Corporation
State of Incorporation/Organization: Delaware
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records: 10 Campus Boulevard, Newtown Square, PA  19073

Legal Name:  GMH Communities Trust
Type of Organization:  Real Estate Investment Trust
State of Incorporation/Organization: Maryland
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Legal Name: GMH Communities TRS, Inc.
Type of Organization:  Corporation
State of Incorporation/Organization: Delaware
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Legal Name:  GMH Military Housing, LLC
Type of Organization:  Limited Liability Company
State of Incorporation/Organization: Delaware
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Legal Name:  GMH Military Housing Investments, LLC
Type of Organization:  Limited Liability Company
State of Incorporation/Organization: Delaware
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Legal Name:  College Park Management TRS, Inc.
Type of Organization:  Corporation
State of Incorporation/Organization: Delaware
Prior Names: None
Chief Executive Office/Chief Place of Business and Location where Grantor maintains Receivables records:  10 Campus Boulevard, Newtown Square, PA  19073

Schedule II

Investment Property

College Park Management, LLC

      Money Market account — 2000018262980  (Wachovia)

Schedule III

Deposit Accounts

GMH Communities, LP

Central depository account/ZBA is tied to this account - 2000012962189 (Wachovia)

Payroll account - 2000012962192 (Wachovia)

ZBA clearing account  - 2000012962215 (Wachovia)

Bank account to be closed (unknown as to purpose) - 2000018262980 (Wachovia)

College Park Management TRS, Inc.

        Merrill Lynch — checking account — 216-07702

Schedule IV

Inventory and Equipment

The Grantors own various items of equipment and inventory used in the normal course of their respective operations. With respect to the student and military housing segments, the properties and projects operate inventory and equipment (such as computers, office equipment, tanning beds, televisions, game room-related items, furniture and appliances) that are located on the site of the property and are primarily owned by the property-level entity with respect to such property; however, some items may be owned through the direct purchase by GMH Communities, LP. With respect to the corporate operations of GMH Communities Trust, general office-related equipment located at the corporate headquarters building is generally owned by GMH Communities, LP.

Schedule V

Copyrights, Copyright Licenses

None.

Schedule VI

Patents and Patent Licenses

None.

Schedule VII

Trademarks and Trademark Licenses

See attached Schedule A.

EX-10.36

Exhibit 10.36

GUARANTY

This GUARANTY (this “Guaranty”) is executed as of October 2, 2006, by GMH COMMUNITIES TRUST (“Guarantor”), for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION (“Lender”).

W I T N E S S E T H:

WHEREAS, GMH Communities, LP, a Delaware limited partnership (“Borrower”) has become indebted, and may from time to time be further indebted, to Lender with respect to a revolving loan in the maximum principal amount of $250,000,000 (the “Loan”), $138,641,062.59 of which is being advanced on the date hereof and the remainder of which will be advanced from time to time after the date hereof in accordance with the Loan Agreement, and which is made pursuant to that certain Loan Agreement, dated of even date herewith, among Borrower and Lender (as same may be amended, restated, replaced, supplemented or otherwise modified, the “Loan Agreement”);

WHEREAS, the Loan is evidenced by that certain Promissory Note dated of even date herewith, executed by Borrower and payable to the order of Lender in the maximum principal amount of Two Hundred Fifty Million and No/100 Dollars ($250,000,000.00) (as the same may be amended, restated, replaced, supplemented, increased, extended, split or otherwise modified, “Note”);

WHEREAS, the Guarantor is the owner of approximately 56.8% of the limited partnership interests of Borrower as of the date hereof, and through its wholly-owned subsidiary, GMH Communities GP Trust, is the owner of 100% of the general partnership interests of Borrower, and Guarantor will directly benefit from Lender’s making the Loan to Borrower; and

WHEREAS, as a condition to Lender’s willingness to make the Loan to Borrower, Lender has requested that Guarantor enter into this Guaranty in order to irrevocably guaranty, inter alia, the payment by Borrower of all of the indebtedness evidenced by the Note and all of the other obligations and liabilities of Borrower under the Note, the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement) as hereinafter provided and, in order to induce the Lender to make the Loan and in consideration thereof, Guarantor has agreed to execute and deliver to Lender this Guaranty.

NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower and to extend such additional credit as Lender may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

ARTICLE I

NATURE AND SCOPE OF GUARANTY

Section 1.1             Guaranty of Obligation.  Guarantor hereby jointly and severally unconditionally and irrevocably guarantees to the Lender the following obligations (the “Guaranteed Obligations”):

(a)           The due and punctual payment in full (and not merely the collectibility) of the aggregate principal sum of the Loan, as set forth in the Note and the other Loan Documents and all interest accruing thereon, including default interest, late charge, exit fees and prepayment premiums or fees, in each case when due and payable, whether on any installment payment date or at the stated or accelerated maturity, all in accordance with the provisions of the Note, the Loan Agreement and the other Loan Documents;

(b)           The due and punctual payment in full (and not merely the collectibility) of each other sum or charge which at any time becomes due and payable in accordance with the provisions of the Note, the Loan Agreement and any of the other Loan Documents;

(c)           The due and punctual performance of all of the Borrower’s other obligations under the provisions of the Note, the Loan Agreement and the other Loan Documents;

(d)           The due and punctual payment in full of all sums advanced, including all Additional Advances, and costs and expenses incurred by Lender in connection with the Loan or any part thereof, any renewal, extension or change of or substitution for the Loan or any part thereof, whether made or incurred by Borrower or Lender;

(e)           The due and punctual performance (and not merely the collectibility) of each obligation of Borrower contained in any renewal, extension, amendment, modification, consolidation, change of or substitution or replacement for, all or any part of the Note, the Loan Agreement or any other Loan Document; and

(f)            The due and punctual payment in full (and not merely the collectibility) of any and all losses, costs, damages or expenses incurred by Lender and arising out of any default by Guarantor in performing any of its obligations hereunder or any default by Borrower in performing any of its obligations under the Note, the Loan Agreement or any other Loan Document, regardless of whether such losses, damages or expenses are expressly provided for in the provisions thereof, or are then otherwise allowable by law.

If Borrower fails duly and punctually to pay any of such principal sum, any interest accruing thereon, any other such sum or charge including, without limitation, late charges and prepayment premiums, or any such loss, damages or expenses, Guarantor shall jointly and severally forthwith pay the same, together with interest thereon from the date on which payment thereof by the Borrower became due at the default rate of interest provided in the Loan Agreement.

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Section 1.2             Nature of Guaranty.  This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance and not a guaranty of collection.  This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor.  The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to Lender with respect to the Guaranteed Obligations.  This Guaranty may be enforced by Lender and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note.  Notwithstanding the foregoing or any other provision of this Guaranty, the liability of each Guarantor individually with respect to the Guaranteed Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., or any comparable provisions of any applicable state law.

Section 1.3             Guaranteed Obligations Not Reduced by Offset.  The Guaranteed Obligations and the liabilities and obligations of Guarantor to Lender hereunder shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower or any other party against Lender or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

Section 1.4             Payment By Guarantor.  If all or any part of the Guaranteed Obligations shall not be punctually paid when incurred or when due, as applicable, whether at demand, maturity, acceleration or otherwise, and after the expiration of any applicable cure or grace period under the Loan Agreement, Guarantor shall, immediately upon demand by Lender and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Lender at Lender’s address as set forth herein.  Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations and may be made from time to time with respect to the same or different items of Guaranteed Obligations.  Such demand shall be deemed made, given and received in accordance with the notice provisions hereof.

Section 1.5             No Duty To Pursue Others.  It shall not be necessary for Lender (and Guarantor hereby waives any rights which Guarantor may have to require Lender), in order to enforce the obligations of Guarantor hereunder, first to (i) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other person, (ii) enforce Lender’s rights against any collateral which shall ever have been given to secure the Loan, (iii) enforce Lender’s rights against any other guarantors of the Guaranteed Obligations, (iv) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (v) exhaust any remedies available to Lender against any collateral which shall ever have been given to secure the Loan, or (vi) resort to any other means of obtaining payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.

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Section 1.6             Waivers.  Guarantor agrees to the provisions of the Loan Documents and hereby waives notice of (i) any loans or advances made by Lender to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension of the Note, the Loan Agreement or any other Loan Documents, (iv) the execution and delivery by Borrower and Lender of any other loan or credit agreement or of Borrower’s execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Property, (v) the occurrence of any breach by Borrower or an Event of Default, (vi) Lender’s transfer or disposition of the Guaranteed Obligations, or any part thereof, (vii) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii) protest, proof of non-payment or default by Borrower, or (ix) any other action at any time taken or omitted by Lender and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guarantied.

Section 1.7             Payment of Expenses.  In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, immediately upon demand by Lender, pay Lender all reasonable out-of-pocket costs and expenses (including court costs and reasonable attorneys’ fees) incurred by Lender in the enforcement hereof or the preservation of Lender’s rights hereunder.  The covenant contained in this Section shall survive the payment and performance of the Guaranteed Obligations.

Section 1.8             Effect of Bankruptcy.  In the event that pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law or any judgment, order or decision thereunder, Lender must rescind or restore any payment or any part thereof received by Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Lender shall be without effect and this Guaranty shall remain in full force and effect. It is the intention of Borrower and Guarantor that Guarantor’s obligations hereunder shall not be discharged except by Guarantor’s performance of such obligations and then only to the extent of such performance.

Section 1.9             Waiver of Subrogation, Reimbursement and Contribution.  Notwithstanding anything to the contrary contained in this Guaranty and until the Debt and the Owner Indebtedness (as defined in the Deed of Trust) is paid in full in accordance with the Loan Documents and this Guaranty, (a) Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of Lender), to assert any claim against Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty and (b) during the occurrence and continuance of an Event of Default, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any agreement, at law or in equity to seek contribution, indemnification or any other form of reimbursement from Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty or otherwise.

Section 1.10           Borrower.  The term “Borrower” as used herein shall include any new or successor corporation, association, partnership (general or limited), limited liability

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company joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower.

ARTICLE II

EVENTS AND CIRCUMSTANCES NOT REDUCING

OR DISCHARGING GUARANTOR’S OBLIGATIONS

Guarantor hereby consents and agrees to each of the following and agrees that Guarantor’s obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following:

Section 2.1             Modifications.  Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, the Note, the Loan Agreement, the other Loan Documents, the Deed of Trust, or any other document, instrument, contract or understanding between Borrower and Lender or any other parties pertaining to the Guaranteed Obligations or any failure of Lender to notify Guarantor of any such action.

Section 2.2             Adjustment.  Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to Borrower or any Guarantor.

Section 2.3             Condition of Borrower or Guarantor.  The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, Guarantor or any other party at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or Guarantor or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor or any changes in the shareholders, partners or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor.

Section 2.4             Invalidity of Guaranteed Obligations.  The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations or any document or agreement executed in connection with the Guaranteed Obligations for any reason whatsoever, including without limitation the fact that (i) the Guaranteed Obligations or any part thereof exceeds the amount permitted by law, (ii) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (iii) the officers or representatives executing the Note, the Deed of Trust, the Loan Agreement, this Guaranty, the other Loan Documents or the other Security Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed Obligations violate applicable usury laws, (v) the Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (vii) the Note, the Loan Agreement, any of the other Loan Documents or any of the other Security Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain

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liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason.

Section 2.5             Release of Obligors.  Any full or partial release of the liability of Borrower on the Guaranteed Obligations or any part thereof, or of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other parties to pay or perform the Guaranteed Obligations.

Section 2.6             Other Collateral.  The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.

Section 2.7             Release of Collateral.  Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.

Section 2.8             Care and Diligence.  The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of any collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (i) to take or prosecute any action for the collection of any of the Guaranteed Obligations or (ii) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (iii) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.

Section 2.9             Unenforceability.  The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations.

Section 2.10           Offset.  The Guaranteed Obligations and the liabilities and obligations of the Guarantor to Lender hereunder shall not be reduced, discharged or released because of or by reason of any existing or future right of offset, claim or defense of Borrower against Lender, or any other party, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

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Section 2.11           Merger.  The reorganization, merger or consolidation of Borrower into or with any other Person.

Section 2.12           Preference.  Any payment by Borrower to Lender is held to constitute a preference under bankruptcy laws or for any reason Lender is required to refund such payment or pay such amount to Borrower or someone else.

Section 2.13           Other Actions Taken or Omitted.  Any other action taken or omitted to be taken with respect to the Loan Documents or the Security Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce Lender to enter into the Loan Documents and the Security Documents and extend credit to Borrower, Guarantor represents and warrants to Lender as follows:

Section 3.1             Benefit.  Guarantor is the indirect owner of the general partner of Borrower and owns a majority limited partnership interest in Borrower, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations.  Guarantor has received reasonably equivalent value in exchange for the making of this Guaranty.

Section 3.2             Familiarity and Reliance.  Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of the Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty.

Section 3.3             No Representation By Lender.  Neither Lender nor any other party has made any representation, warranty or statement to Guarantor in order to induce the Guarantor to execute this Guaranty.

Section 3.4             Guarantor’s Financial Condition.  As of the date hereof, and immediately after giving effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is and will be solvent and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities.

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Section 3.5             Legality.  The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not and will not contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor.  This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors’ rights.

Section 3.6             Survival.  All representations and warranties made by Guarantor herein shall survive the execution hereof.

ARTICLE IV

SUBORDINATION OF CERTAIN INDEBTEDNESS

Section 4.1             Subordination of All Guarantor Claims.  As used herein, the term “Guarantor Claims” shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor.  The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantor’s payment of all or a portion of the Guaranteed Obligations.  While any Event of Default is continuing, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims and Guarantor shall not at any time during the term of the Loan bring any action or proceeding against Borrower to enforce Guarantor’s rights to Guarantor Claims.  Notwithstanding anything contained herein to the contrary, the provisions of this Section 4.1 shall not restrict Guarantor’s rights to pay corporate salaries after Borrower remits sums necessary for Guarantor to do so in the standard operating procedures of Borrower and Guarantor.

Section 4.2             Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims.  Guarantor hereby assigns such dividends and payments to Lender.  Should Lender receive, for application against the Guaranteed Obligations, any dividend or payment which is otherwise payable to Guarantor and which, as between Borrower and Guarantor, shall constitute a credit against the Guarantor Claims, then, upon payment to Lender in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lender to the extent that such payments to Lender on the Guarantor Claims have contributed toward the liquidation of the

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Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Lender had not received dividends or payments upon the Guarantor Claims. Until such time as the Debt is repaid in full, in any case commenced by or against Borrower or any of the limited partners or the general partner of Borrower under Chapter 11 of the Bankruptcy Code or any similar provision thereof or any similar federal or state statute, Lender shall have the exclusive right to exercise any voting rights in respect of Guarantor Claims and Guarantor shall not have the right to, and may not, vote the same; this shall be deemed a present assignment of Guarantor Claims and the right to vote the same.

Section 4.3             Payments Held in Trust.  In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Lender an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Lender, and Guarantor covenants promptly to pay the same to Lender.

Section 4.4             Liens Subordinate.  Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Lender presently exist or are hereafter created or attach.  Without the prior written consent of Lender, Guarantor shall not (i) exercise or enforce any creditor’s right it may have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor.

ARTICLE V

MISCELLANEOUS

Section 5.1             Waiver.  No failure to exercise, and no delay in exercising, on the part of Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right.  The rights of Lender hereunder shall be in addition to all other rights provided by law.  No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved.  No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.

Section 5.2             Notices.  All notices given hereunder shall be in writing and shall be either hand delivered or mailed, by registered U.S. mail, Return Receipt Requested, first class

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postage prepaid, to the parties at their respective addresses below or at such other address for any party as such party may designate by notice to the other parties hereto:

If to Lender:	Wachovia Bank, National Association
	One Wachovia Center
	301 South College Street, NC0172
	Charlotte, NC 28288
	Attention: Rex Rudy
with a copy to:	Cadwalader, Wickersham & Taft LLP
	227 West Trade Street
	Suite 2400
	Charlotte, North Carolina 28202
	Attention: Richard Madden, Esq.
If to Guarantor:	c/o GMH Communities, LP
	10 Campus Boulevard
	Newtown Square, PA 19073
	Attention: Joseph Macchione
	Facsimile No.: 610-355-8480
with a copy to:	Morgan, Lewis & Bockius LLP
	1701 Market Street
	Philadelphia, PA 19103
	Attention: Michael J. Pedrick
	Facsimile No.: 215-963-5001

Section 5.3             Governing Law; Submission to Jurisdiction.  This Guaranty shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America.  Any legal suit, action or proceeding against Lender or Guarantor arising out of or relating to this Guaranty may at Lender’s option be instituted in any Federal or State court in the City of New York, County of New York, pursuant to Section 5-1402 of the New York General Obligations Law and Guarantor waives any objections which it may now or hereafter have based on venue and/or forum non conveniens of any such suit, action or proceeding, and Guarantor hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding.  Guarantor does hereby designate and appoint:

Capital Services, Inc.

40 Colvin Avenue, Suite 200

Albany, NY 12206

as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any Federal or State court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service mailed or delivered to Guarantor in the manner provided herein shall be

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deemed in every respect effective service of process upon Guarantor in any such suit, action or proceeding in the State of New York.

Section 5.4             Invalid Provisions.  If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.

Section 5.5             Amendments.  This Guaranty may be amended only by an instrument in writing executed by the party or an authorized representative of the party against whom such amendment is sought to be enforced.

Section 5.6             Parties Bound; Assignment; Joint and Several.  This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of Lender, assign any of its rights, powers, duties or obligations hereunder.  If Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several.

Section 5.7             Headings.  Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty.

Section 5.8             Recitals.  The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.

Section 5.9             Counterparts.  To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required.  It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart.  All counterparts shall collectively constitute a single instrument.  It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

Section 5.10           Rights and Remedies.  If Guarantor becomes liable for any indebtedness owing by Borrower to Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may ever have against Guarantor.  The exercise by Lender of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.

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Section 5.11           Other Defined Terms.  Any capitalized term utilized herein shall have the meaning as specified in the Loan Agreement, unless such term is otherwise specifically defined herein.

Section 5.12         Entirety.  THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR’S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT.  THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.

Section 5.13         Waiver of Right To Trial By Jury.  GUARANTOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, THE LOAN AGREEMENT, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.

Section 5.14           Cooperation.  Guarantor acknowledges that Lender and its successors and assigns may (i) sell this Guaranty, the Note, the Deed of Trust, Security Documents and other Loan Documents to one or more investors as a whole loan, (ii) participate the Loan secured by this Guaranty to one or more investors, (iii) deposit this Guaranty, the Note, the Deed of Trust, Security Documents and other Loan Documents with a trust, which trust may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interest therein to investors (the transactions referred to in clauses (i) through (iv) are hereinafter each referred to as “Secondary Market Transaction”).  Guarantor shall reasonably cooperate with Lender in effecting any such Secondary Market Transaction and shall reasonably cooperate to implement all requirements imposed by any Rating involved in any Secondary Market Transaction.  Guarantor shall make available to Lender all non-confidential, non-proprietary information and documents concerning its business and operations that Lender may reasonably request.  Lender shall be permitted to share all such information with the

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investment banking firms, Rating Agencies, accounting firms, law firms and other third-party advisory firms involved with the Loan, the Deed of Trust, the Security Documents and the Loan Documents or the applicable Secondary Market Transaction.  It is understood that the information provided by Guarantor to Lender may ultimately be incorporated into the offering documents for the Secondary Market Transaction and thus various investors may also see some or all of the information.  Lender and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Guarantor in the form as provided by Guarantor.  Lender may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development.

Section 5.15           Reinstatement in Certain Circumstances.  If at any time any payment of the principal of or interest under the Note or the Indemnity Guaranty or any other amount payable by the Borrower or Guarantor under the Loan Documents or the Security Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantor’s obligations hereunder with respect to such payment shall be immediately reinstated as though such payment has been due but not made at such time.

Section 5.16           Joint and Several Liability.  If Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party hereunder shall be joint and several.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

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This GUARANTY is executed as of the day and year first above written.

GUARANTOR:
GMH COMMUNITIES TRUST, a Maryland real estate investment trust
By:	/s/ Joseph M. Macchione
	Name: Joseph M. Macchione
	Title: EVP & General Counsel

EX-10.37

Exhibit 10.37

GUARANTY

This GUARANTY (this “Guaranty”) is executed as of October 2, 2006, by each of the parties that are signatories hereto, each a “Guarantor” and collectively the “Guarantors”), for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION (“Lender”).

W I T N E S S E T H:

WHEREAS, GMH Communities, LP, a Delaware limited partnership (“Borrower”) has become indebted, and may from time to time be further indebted, to Lender with respect to a revolving loan in the maximum principal amount of $250,000,000 (the “Loan”), $138,641,062.59 of which is being advanced on the date hereof and the remainder of which  will be advanced from time to time after the date hereof in accordance with the Loan Agreement, and which is made pursuant to that certain Loan Agreement, dated of even date herewith, among Borrower and Lender (as same may be amended, restated, replaced, supplemented or otherwise modified, the “Loan Agreement”);

WHEREAS, the Loan is evidenced by that certain Promissory Note dated of even date herewith, executed by Borrower and payable to the order of Lender in the maximum principal amount of Two Hundred Fifty Million and No/100 Dollars ($250,000,000.00) (as the same may be amended, restated, replaced, supplemented, increased, extended, split or otherwise modified, “Note”);

WHEREAS, Borrower is the owner of 100% of the direct or indirect interests in each Guarantor, and each Guarantor will directly benefit from Lender’s making the Loan to Borrower;

WHEREAS, as a condition to Lender’s willingness to make the Loan to Borrower, Lender has requested that Guarantor enter into this Guaranty in order to irrevocably guaranty, inter alia, the payment by Borrower of all of the indebtedness evidenced by the Note and all of the other obligations and liabilities of Borrower under the Note, the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement) as hereinafter provided and, in order to induce the Lender to make the Loan and in consideration thereof, Guarantor has agreed to execute and deliver to Lender this Guaranty; and

WHEREAS, in order to secure their obligations and liabilities under this Guaranty, certain of the Guarantors have executed and delivered to Lender that certain Pledge Agreement dated as of the date hereof from the pledgors named therein for the benefit of Lender (as amended, restated, replaced, supplemented or otherwise modified, the “Pledge Agreement”) granting to Lender a security interest in the Collateral as defined, and more particularly described, therein.

NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower and to extend such additional credit as Lender may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

ARTICLE I

NATURE AND SCOPE OF GUARANTY

Section 1.1             Guaranty of Obligation.  Guarantors hereby jointly and severally unconditionally and irrevocably guarantee to the Lender the following obligations (the “Guaranteed Obligations”):

(a)           The due and punctual payment in full (and not merely the collectibility) of the aggregate principal sum of the Loan, as set forth in the Note and the other Loan Documents and all interest accruing thereon, including default interest, late charge, exit fees and prepayment premiums or fees, in each case when due and payable, whether on any installment payment date or at the stated or accelerated maturity, all in accordance with the provisions of the Note, the Loan Agreement and the other Loan Documents;

(b)           The due and punctual payment in full (and not merely the collectibility) of each other sum or charge which at any time becomes due and payable in accordance with the provisions of the Note, the Loan Agreement and any of the other Loan Documents;

(c)           The due and punctual performance of all of the Borrower’s other obligations under the provisions of the Note, the Loan Agreement and the other Loan Documents;

(d)           The due and punctual payment in full of all sums advanced, including all Additional Advances, and costs and expenses incurred by Lender in connection with the Loan or any part thereof, any renewal, extension or change of or substitution for the Loan or any part thereof, whether made or incurred by Borrower or Lender;

(e)           The due and punctual performance (and not merely the collectibility) of each obligation of Borrower contained in any renewal, extension, amendment, modification, consolidation, change of or substitution or replacement for, all or any part of the Note, the Loan Agreement or any other Loan Document; and

(f)            The due and punctual payment in full (and not merely the collectibility) of any and all losses, costs, damages or expenses incurred by Lender and arising out of any default by any Guarantor in performing any of its obligations hereunder or under the Pledge Agreement, or arising out of any default by Borrower under the Note, the Loan Agreement or any other Loan Document regardless of whether such losses, damages or expenses are expressly provided for in the provisions thereof, or are then otherwise allowable by law.

If Borrower fails duly and punctually to pay any of such principal sum, any interest accruing thereon, any other such sum or charge including, without limitation, late

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charges and prepayment premiums, or any such loss, damages or expenses, Guarantors shall jointly and severally forthwith pay the same, together with interest thereon from the date on which payment thereof by the Borrower became due at the default rate of interest provided in the Loan Agreement.

Section 1.2             Nature of Guaranty.  This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance and not a guaranty of collection.  This Guaranty may not be revoked by any Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by any Guarantor.  The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of a Guarantor to Lender with respect to the Guaranteed Obligations.  This Guaranty may be enforced by Lender and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note.  Notwithstanding the foregoing or any other provision of this Guaranty, the liability of each Guarantor individually with respect to the Guaranteed Obligations shall be limited to an aggregate amount equal to the lesser of (a) the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., or any comparable provisions of any applicable state law and (b) the amount set forth for an individual Guarantor on Schedule 1.2 attached hereto and incorporated herein (the amount in clause (b), the “Allocated Guaranty Amount”).

Section 1.3             Guaranteed Obligations Not Reduced by Offset.  The Guaranteed Obligations and the liabilities and obligations of Guarantors to Lender hereunder shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower or any other party against Lender or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

Section 1.4             Payment By Guarantor.  If all or any part of the Guaranteed Obligations shall not be punctually paid when incurred or when due, as applicable, whether at demand, maturity, acceleration or otherwise, and after the expiration of any applicable cure or grace period under the Loan Agreement, each Guarantor shall, immediately upon demand by Lender and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Lender at Lender’s address as set forth herein.  Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations and may be made from time to time with respect to the same or different items of Guaranteed Obligations.  Such demand shall be deemed made, given and received in accordance with the notice provisions hereof.

Section 1.5             No Duty To Pursue Others.  It shall not be necessary for Lender (and each Guarantor hereby waives any rights which such Guarantor may have to require Lender), in order to enforce the obligations of each Guarantor hereunder, first to (i) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other person, (ii) enforce Lender’s rights against any collateral which shall ever have been given to secure the Loan, (iii) enforce Lender’s rights against any other

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guarantors of the Guaranteed Obligations, (iv) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (v) exhaust any remedies available to Lender against any collateral which shall ever have been given to secure the Loan, or (vi) resort to any other means of obtaining payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.

Section 1.6             Waivers.  Each Guarantor agrees to the provisions of the Loan Documents and hereby waives notice of (i) any loans or advances made by Lender to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension of the Note, the Loan Agreement or any other Loan Documents, (iv) the execution and delivery by Borrower and Lender of any other loan or credit agreement or of Borrower’s execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Collateral, (v) the occurrence of any breach by Borrower or an Event of Default, (vi) Lender’s transfer or disposition of the Guaranteed Obligations, or any part thereof, (vii) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii) protest, proof of non-payment or default by Borrower, or (ix) any other action at any time taken or omitted by Lender and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guarantied.

Section 1.7             Payment of Expenses.  In the event that a Guarantor should breach or fail to timely perform any provisions of this Guaranty, such Guarantor shall, immediately upon demand by Lender, pay Lender all reasonable out-of-pocket costs and expenses (including court costs and reasonable attorneys’ fees) incurred by Lender in the enforcement hereof or the preservation of Lender’s rights hereunder.  The covenant contained in this Section shall survive the payment and performance of the Guaranteed Obligations.

Section 1.8             Effect of Bankruptcy.  In the event that pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law or any judgment, order or decision thereunder, Lender must rescind or restore any payment or any part thereof received by Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to a Guarantor by Lender shall be without effect and this Guaranty shall remain in full force and effect. It is the intention of Borrower and each Guarantor that each Guarantor’s obligations hereunder shall not be discharged except by Guarantors’ performance of such obligations and then only to the extent of such performance.

Section 1.9             Waiver of Subrogation, Reimbursement and Contribution.  Notwithstanding anything to the contrary contained in this Guaranty and until the Debt is paid in full in accordance with the Loan Documents and this Guaranty, (a) each Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of Lender), to assert any claim against Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by the Guarantor under or in connection with this Guaranty and (b) during the occurrence and continuance of an Event of Default, each Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and all rights it may now or hereafter have under any

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agreement, at law or in equity to seek contribution, indemnification or any other form of reimbursement from Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by each Guarantor under or in connection with this Guaranty or otherwise.

Section 1.10           Borrower.  The term “Borrower” as used herein shall include any new or successor corporation, association, partnership (general or limited), limited liability company joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower.

ARTICLE II

EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTORS’ OBLIGATIONS

Each Guarantor hereby consents and agrees to each of the following and agrees that Guarantors’ obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which a Guarantor might otherwise have as a result of or in connection with any of the following:

Section 2.1             Modifications.  Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, the Note, the Loan Agreement, the other Loan Documents, the Pledge Agreement, or any other document, instrument, contract or understanding between Borrower and Lender or any other parties pertaining to the Guaranteed Obligations or any failure of Lender to notify a Guarantor of any such action.

Section 2.2             Adjustment.  Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to Borrower or any Guarantor.

Section 2.3             Condition of Borrower or Guarantor.  The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, any Guarantor or any other party at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or any Guarantor or any sale, lease or transfer of any or all of the assets of Borrower or any Guarantor or any changes in the shareholders, partners or members of Borrower or any Guarantor; or any reorganization of Borrower or any Guarantor.

Section 2.4             Invalidity of Guaranteed Obligations.  The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations or any document or agreement executed in connection with the Guaranteed Obligations for any reason whatsoever, including without limitation the fact that (i) the Guaranteed Obligations or any part thereof exceeds the amount permitted by law, (ii) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (iii) the officers or representatives executing the Note, the Pledge Agreement, the Loan Agreement, this Guaranty, the other Loan Documents or the other Security Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (iv) the

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Guaranteed Obligations violate applicable usury laws, (v) the Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (vii) the Note, the Loan Agreement, any of the other Loan Documents or any of the other Security Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that each Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason.

Section 2.5             Release of Obligors.  Any full or partial release of the liability of Borrower on the Guaranteed Obligations or any part thereof, or of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by each Guarantor that each Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and no Guarantor has been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other parties to pay or perform the Guaranteed Obligations.

Section 2.6             Other Collateral.  The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.

Section 2.7             Release of Collateral.  Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.

Section 2.8             Care and Diligence.  The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of any collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (i) to take or prosecute any action for the collection of any of the Guaranteed Obligations or (ii) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (iii) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.

Section 2.9             Unenforceability.  The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by each Guarantor that such Guarantor is not entering into this

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Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations.

Section 2.10           Offset.  The Guaranteed Obligations and the liabilities and obligations of each Guarantor to Lender hereunder shall not be reduced, discharged or released because of or by reason of any existing or future right of offset, claim or defense of Borrower against Lender, or any other party, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

Section 2.11           Merger.  The reorganization, merger or consolidation of Borrower into or with any other Person.

Section 2.12           Preference.  Any payment by Borrower to Lender is held to constitute a preference under bankruptcy laws or for any reason Lender is required to refund such payment or pay such amount to Borrower or someone else.

Section 2.13           Other Actions Taken or Omitted.  Any other action taken or omitted to be taken with respect to the Loan Documents or the Security Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices any Guarantor or increases the likelihood that any Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of each Guarantor that such Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

To induce Lender to enter into the Loan Documents and the Security Documents and extend credit to Borrower, each Guarantor represents and warrants to Lender as follows:

Section 3.1             Benefit.  Each Guarantor is 100% directly or indirectly owned by Borrower, is the sole owner of the Mezzanine Collateral (as defined in the Loan Agreement) that it owns on the date hereof, if any, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations.  Each Guarantor has received reasonably equivalent value in exchange for the making of this Guaranty.

Section 3.2             Familiarity and Reliance.  Each Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of the Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; however, no Guarantor is relying on such financial condition or the collateral as an inducement to enter into this Guaranty.

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Section 3.3             No Representation By Lender.  Neither Lender nor any other party has made any representation, warranty or statement to any Guarantor in order to induce a Guarantor to execute this Guaranty.

Section 3.4             Guarantor’s Financial Condition.  As of the date hereof, and immediately after giving effect to this Guaranty and the contingent obligation evidenced hereby, each Guarantor is and will be solvent and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities.

Section 3.5             Legality.  The execution, delivery and performance by each Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not and will not contravene or conflict with any law, statute or regulation whatsoever to which a Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, charge, lien, or any contract, agreement or other instrument to which a Guarantor is a party or which may be applicable to a Guarantor.  This Guaranty is a legal and binding obligation of each Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors’ rights.

Section 3.6             Survival.  All representations and warranties made by Guarantor herein shall survive the execution hereof.

ARTICLE IV

SUBORDINATION OF CERTAIN INDEBTEDNESS

Section 4.1             Subordination of All Guarantor Claims.  As used herein, the term “Guarantor Claims” shall mean all debts and liabilities of Borrower to each Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by a Guarantor.  The Guarantor Claims shall include without limitation all rights and claims of any Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of a Guarantor’s payment of all or a portion of the Guaranteed Obligations.  While any Event of Default is continuing, no Guarantor shall receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims and no Guarantor shall at any time during the term of the Loan bring any action or proceeding against Borrower to enforce such Guarantor’s rights to Guarantor Claims.

Section 4.2             Claims in Bankruptcy.  In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving a Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. 

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Each Guarantor hereby assigns such dividends and payments to Lender.  Should Lender receive, for application against the Guaranteed Obligations, any dividend or payment which is otherwise payable to a Guarantor and which, as between Borrower and such Guarantor, shall constitute a credit against the Guarantor Claims, then, upon payment to Lender in full of the Guaranteed Obligations, such Guarantor shall become subrogated to the rights of Lender to the extent that such payments to Lender on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Lender had not received dividends or payments upon the Guarantor Claims. Until such time as the Debt is repaid in full, in any case commenced by or against Borrower or any of the limited partners or the general partner of Borrower under Chapter 11 of the Bankruptcy Code or any similar provision thereof or any similar federal or state statute, Lender shall have the exclusive right to exercise any voting rights in respect of Guarantor Claims and no Guarantor shall have the right to, and may not, vote the same; this shall be deemed a present assignment of Guarantor Claims and the right to vote the same.

Section 4.3             Payments Held in Trust.  In the event that, notwithstanding anything to the contrary in this Guaranty, a Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, such Guarantor agrees to hold in trust for Lender an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Lender, and each Guarantor covenants promptly to pay the same to Lender.

Section 4.4             Liens Subordinate.  Each Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of such Guarantor or Lender presently exist or are hereafter created or attach.  Without the prior written consent of Lender, no Guarantor shall (i) exercise or enforce any creditor’s right it may have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by such Guarantor.

ARTICLE V

MISCELLANEOUS

Section 5.1             Waiver.  No failure to exercise, and no delay in exercising, on the part of Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right.  The rights of Lender hereunder shall be in addition to all other rights provided by law.  No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom,

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shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved.  No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.

Section 5.2             Notices.  All notices given hereunder shall be in writing and shall be either hand delivered or mailed, by registered U.S. mail, Return Receipt Requested, first class postage prepaid, to the parties at their respective addresses below or at such other address for any party as such party may designate by notice to the other parties hereto:

If to Lender:	Wachovia Bank, National Association
	One Wachovia Center
	301 South College Street, NC0172
	Charlotte, NC 28288
	Attention: Rex Rudy
with a copy to:	Cadwalader, Wickersham & Taft LLP
	227 West Trade Street
	Suite 2400
	Charlotte, North Carolina 28202
	Attention: Richard Madden, Esq.
If to Guarantor:	c/o GMH Communities, LP
	10 Campus Boulevard
	Newtown Square, PA 19073
	Attention: Joseph Macchione
	Facsimile No.: 610-355-8480
with a copy to:	Morgan, Lewis & Bockius LLP
	1701 Market Street
	Philadelphia, PA 19103
	Attention: Michael J. Pedrick
	Facsimile No.: 215-963-5001

Section 5.3             Governing Law; Submission to Jurisdiction.  This Guaranty shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America.  Any legal suit, action or proceeding against Lender or a Guarantor arising out of or relating to this Guaranty may at Lender’s option be instituted in any Federal or State court in the City of New York, County of New York, pursuant to Section 5-1402 of the New York General Obligations Law and each Guarantor waives any objections which it may now or hereafter have based on venue and/or forum non conveniens of any such suit, action or proceeding, and each Guarantor hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding.  Each Guarantor does hereby designate and appoint:

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Capitol Services, Inc.

40 Colvin Avenue, Suite 200

Albany, NY 12206

as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any Federal or State court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service mailed or delivered to such Guarantor in the manner provided herein shall be deemed in every respect effective service of process upon such Guarantor in any such suit, action or proceeding in the State of New York.

Section 5.4             Invalid Provisions.  If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.

Section 5.5             Amendments.  This Guaranty may be amended only by an instrument in writing executed by the party or an authorized representative of the party against whom such amendment is sought to be enforced.

Section 5.6             Parties Bound; Assignment; Joint and Several.  This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that no Guarantor may, without the prior written consent of Lender, assign any of its rights, powers, duties or obligations hereunder.  If any Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several.

Section 5.7             Headings.  Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty.

Section 5.8             Recitals.  The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.

Section 5.9             Counterparts.  To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required.  It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart.  All counterparts shall collectively constitute a single instrument.  It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

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Section 5.10           Rights and Remedies.  If any Guarantor becomes liable for any indebtedness owing by Borrower to Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may ever have against such Guarantor.  The exercise by Lender of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy.

Section 5.11           Other Defined Terms.  Any capitalized term utilized herein shall have the meaning as specified in the Loan Agreement, unless such term is otherwise specifically defined herein.

Section 5.12         Entirety.  THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTORS AND LENDER WITH RESPECT TO GUARANTORS’ GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.  THIS GUARANTY IS INTENDED BY GUARANTORS AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN ANY GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT.  THERE ARE NO ORAL AGREEMENTS BETWEEN ANY GUARANTOR AND LENDER.

Section 5.13         Waiver of Right To Trial By Jury.  EACH GUARANTOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, THE LOAN AGREEMENT, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY EACH GUARANTOR.

Section 5.14           Cooperation.  Each Guarantor acknowledges that Lender and its successors and assigns may (i) sell this Guaranty, the Note, the Pledge Agreement, Security Documents and other Loan Documents to one or more investors as a whole loan, (ii) participate the Loan secured by this Guaranty to one or more investors, (iii) deposit this Guaranty, the Note, the Pledge Agreement, Security Documents and other Loan Documents with a trust, which trust

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may sell certificates to investors evidencing an ownership interest in the trust assets, or (iv) otherwise sell the Loan or interest therein to investors (the transactions referred to in clauses (i) through (iv) are hereinafter each referred to as “Secondary Market Transaction”).  Each Guarantor shall reasonably cooperate with Lender in effecting any such Secondary Market Transaction and shall reasonably cooperate to implement all requirements imposed by any Rating involved in any Secondary Market Transaction.  Each Guarantor shall make available to Lender all non-confidential, non-proprietary information and documents concerning its business and operations that Lender may reasonably request.  Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms and other third-party advisory firms involved with the Loan, the Pledge Agreement, the Security Documents and the Loan Documents or the applicable Secondary Market Transaction.  It is understood that the information provided by any Guarantor to Lender may ultimately be incorporated into the offering documents for the Secondary Market Transaction and thus various investors may also see some or all of the information.  Lender and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, any Guarantor in the form as provided by such Guarantor.  Lender may publicize the existence of the Loan in connection with its marketing for a Secondary Market Transaction or otherwise as part of its business development.

Section 5.15           Reinstatement in Certain Circumstances.  If at any time any payment of the principal of or interest under the Note or the Indemnity Guaranty or any other amount payable by the Borrower or any Guarantor under the Loan Documents or the Security Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, such Guarantor’s obligations hereunder with respect to such payment shall be immediately reinstated as though such payment has been due but not made at such time.

Section 5.16           Joint and Several Liability.  If any Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party hereunder shall be joint and several.

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

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This GUARANTY is executed as of the day and year first above written.

GUARANTOR:
COLLEGE PARK INVESTMENTS LLC, a
Delaware limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
COLLEGE PARK MANAGEMENT LLC,
a Delaware limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
COLLEGE PARK MANAGEMENT TRS, INC., a Delaware Corporation
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President

GMH MILITARY HOUSING, LLC, a Delaware limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
GMH MILITARY HOUSING
INVESTMENTS, LLC, a Delaware limited
liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
GMH COMMUNITIES TRS, INC., a Delaware corporation
By:	/s/ Joseph M Macchione
	Name: Joseph M Macchione
	Title: Vice President
GMH COMMUNITIES GP TRUST, a Delaware statutory trust
By:	/s/ Joseph M Macchione
	Name: Joseph M Macchione
	Title: Vice President and Secretary

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GMH COMMUNITIES SERVICES, INC. a Delaware corporation
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
CLARIZZ BOULEVAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
LAKESIDE DRIVE ASSOCIATES INTERMEDIATE, LLC, a Delaware limited company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President

3

URBANA ASSOCIATES INTERMEDIATE, LLC, a Delaware
limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
RED MILE ROAD ASSOCIATES
INTERMEDIATE, LLC a Delaware limited
liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
BURBANK DRIVE ASSOCIATE
INTERMEDIATE III, LLC, a Delaware
limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
COMMONS DRIVE ASSOCIATES
INTERMEDIATE, LLC, a Delaware limited
liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President

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ABBOTT ROAD ASSOCIATES
INTERMEDIATE, LLC, a Delaware
limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
CAMPUS VIEW DRIVE ASSOCIATES
INTERMEDIATE, LLC, a Delaware
limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
ALEXANDER ROAD ASSOCIATES INTERMEDIATE, LLC, a Delaware limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President
BROWN ROAD ASSOCIATES
INTERMEDIATE, LLC, a Delaware
limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President

5

KELLER BOULEVARD ASSOCIATES
INTERMEDIATE, LLC, a Delaware
limited liability company
By:	/s/ John Ferer
	Name: John Ferer
	Title: Assistant Vice President

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SCHEDULE 1.2

Guarantor	Allocated Guaranty Amount
Clarizz Boulevard Associates Intermediate, LLC	$	5,667,152
Lakeside Associates Intermediate, LLC	$	2,095,346
Urbana Associates Intermediate, LLC	$	2,642,732
Red Mile Road Associates Intermediate, LLC	$	1,917,461
Burbank Drive Associates Intermediate III, LLC	$	1,444,136
Commons Drive Associates Intermediate, LLC	$	1,468,027
Abbott Road Associates Intermediate, LLC	$	3,252,900
Campus View Drive Associates Intermediate, LLC	$	680,524
Alexander Road Associates Intermediate, LLC	$	2,354,558
Brown Road Associates Intermediate, LLC	$	2,154,091
Keller Boulevard Associates Intermediate, LLC	$	3,075,000

EX-10.38

Exhibit 10.38

PROMISSORY NOTE

$250,000,000	Charlotte, North Carolina
	October 2, 2006

FOR VALUE RECEIVED, the GMH COMMUNITIES, LP, having an address at 10 Campus Boulevard, Newtown Square, Pennsylvania  19073, as maker (individually and collectively, as the context may require, “Borrower”), hereby, jointly and severally, unconditionally promise to pay to the order of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association having an office at 301 South College Street, Charlotte, North Carolina 28288, as payee (“Lender”), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of Two Hundred Fifty Million and 00/100 Dollars ($250,000,000), in lawful money of the United States of America with interest thereon to be computed from the date of this Note at the Applicable Interest Rate, and to be paid in accordance with the terms of this Note and that certain Loan Agreement, dated the date hereof, between Borrower and Lender (the “Loan Agreement”).  All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement.

ARTICLE 1 – PAYMENT TERMS

Borrower agrees to pay the principal sum of this Note and interest on the unpaid principal sum of this Note from time to time outstanding at the rates and on the dates specified in Article II of the Loan Agreement, and the outstanding balance of the principal sum of this Note and all accrued and unpaid interest thereon shall be due and payable on the Maturity Date (or such earlier date as may be required pursuant to Section 2.3.2(c) of the Loan Agreement).

ARTICLE 2 – DEFAULT AND ACCELERATION

The Debt shall without notice become immediately due and payable at the option of Lender if any payment required in this Note is not paid on or prior to the date when due (after the expiration of any applicable notice and grace periods) or if not paid on the Maturity Date or on the happening of any other Event of Default and in addition, upon any such occurrence, Lender shall be entitled to receive interest on the entire unpaid principal sum at the Default Rate pursuant to the terms of the Loan Agreement.  This Article 2, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default.

ARTICLE 3 – LOAN DOCUMENTS

This Note is secured by the Pledge Agreement, the Guaranty, the Security Instruments and the other Loan Documents.  All of the terms, covenants and conditions contained in the Loan Agreement, the Security Instruments, the Guaranty, the Pledge Agreement

and the other Loan Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein.  In the event of a conflict or inconsistency between the terms of this Note and the Loan Agreement, the terms and provisions of the Loan Agreement shall govern.

ARTICLE 4 – SAVINGS CLAUSE

This Note and the Loan Agreement are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate.  If, by the terms of this Note, the Loan Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder.  All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

ARTICLE 5 – NO ORAL CHANGE

This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

ARTICLE 6 – WAIVERS

Borrower and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, notice of intention to accelerate, notice of acceleration, protest and notice of protest and non payment and all other notices of any kind (except to the extent expressly provided in the Loan Documents).  No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Loan Agreement or the other Loan Documents made by any Person other than Lender shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other Person who may become liable for the payment of all or any part of the Debt, under this Note, the Loan Agreement or the other Loan Documents.  No notice to or demand on Borrower shall be deemed to be a waiver of the obligation of Borrower or of the right of Lender to take further action without further notice or demand as provided for in this Note, the Loan Agreement or the other Loan Documents.  If Borrower is a partnership, the agreements herein contained shall remain in force and be applicable, notwithstanding any changes in the

2

individuals or entities comprising the partnership, and the term “Borrower,” as used herein, shall include any alternate or successor partnership, but any predecessor partnership and their partners shall not thereby be released from any liability, except as expressly set forth in the Loan Agreement.  If Borrower is a corporation, the agreements contained herein shall remain in full force and be applicable notwithstanding any changes in the shareholders comprising, or the officers and directors relating to, the corporation, and the term “Borrower” as used herein, shall include any alternate or successor corporation, but any predecessor corporation shall not be relieved of liability hereunder, except as expressly set forth in the Loan Agreement.  If Borrower is a limited liability company, the agreements herein contained shall remain in force and be applicable, notwithstanding any changes in the members comprising the limited liability company, and the term “Borrower” as used herein, shall include any alternate or successor limited liability company, but any predecessor limited liability company and their members shall not thereby be released from any liability, except as expressly set forth in the Loan Agreement.  (Nothing in the foregoing sentence shall be construed as a consent to, or a waiver of, any prohibition or restriction on transfers of interests in such partnership, corporation or limited liability company which may be set forth in the Loan Agreement, the Security Instruments or any other Loan Document.)  If Borrower consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several.

ARTICLE 7 – TRANSFER

Upon the transfer of this Note, Borrower hereby waiving notice of any such transfer, Lender may deliver all the collateral mortgaged, granted, pledged or assigned pursuant to the Loan Documents, or any part thereof, to the transferee who shall thereupon become vested with all the rights, liabilities and obligations herein or under applicable law given to Lender with respect thereto, and Lender shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter; but Lender shall retain all rights hereby given to it with respect to any liabilities and the collateral not so transferred; provided, however, Borrower shall continue making payments due under this Note to the Lender named herein until Borrower has received notice of such transferee and upon receipt of such notice, Borrower shall commence making payments due under this Note to such transferee.

ARTICLE 8 – GOVERNING LAW

This Note shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement.

ARTICLE 9 – NOTICES

All notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement.

ARTICLE 10 – SEVERABILITY

Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under Applicable Laws, but if any such provision of this Note

3

shall be prohibited by or invalid under Applicable Laws, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

4

IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written.

GMH COMMUNITIES, LP, a Delaware limited partnership
By:	GMH Communities GP Trust, a Maryland real estate investment trust, its General Partner
	By: /s/ Joseph Macchione
	Name: Joseph Macchione
	Title: Vice President & Secretary

EX-21.1

Exhibit 21.1

List of Subsidiaries (as of December 31, 2006)

Entity	State of Formation/Incorporation
12th Street Associates Intermediate, LLC	Delaware
12th Street Associates, LLC	Delaware
353 Associates	Pennsylvania
353 Associates GP, LLC	Delaware
3175 JFK Associates, LP	Delaware
Abbott Road Associates Intermediate, LLC	Delaware
Abbott Road Associates, LLC	Delaware
AETC Housing LP	Delaware
Alexander Road Associates Intermediate, LLC	Delaware
Alexander Road Associates, LLC	Delaware
Belle Chase Associates Intermediate II, LLC	Delaware
Belle Chase Associates Intermediate, LLC	Delaware
Belle Chase Associates, LLC	Delaware
Bethel Avenue Associates Intermediate, LLC	Delaware
Bethel Avenue Associates, LLC	Delaware
Binford Street Associates Intermediate, LLC	Delaware
Binford Street Associates, LLC	Delaware
Bowling Green Associates Intermediate, LLC	Delaware
Bowling Green Associates, LLC	Delaware
Brookstone Drive Associates Intermediate, LLC	Delaware
Brookstone Drive Associates, LLC	Delaware
Brown Road Associates Intermediate, LLC	Delaware
Brown Road Associates, LLC	Delaware
Burbank Drive Associates II, LLC	Delaware
Burbank Drive Associates Intermediate II, LLC	Delaware
Burbank Drive Associates Intermediate III, LLC	Delaware
Burbank Drive Associates Intermediate, LLC	Delaware
Burbank Drive Associates, LLC	Delaware
Campus Club Associates Intermediate, LLC	Delaware
Campus Club Associates, LLC	Delaware
Campus Edge Associates Intermediate, LLC	Delaware
Campus Edge Associates, LLC	Delaware
Campus View Drive Associates Intermediate, LLC	Delaware
Campus View Drive Associates, LLC	Delaware
Carlisle/Picatinny Family Housing LP	Delaware
Clarizz Boulevard Associates Intermediate, LLC	Delaware
Clarizz Boulevard Associates, LLC	Delaware
College Park Investments LLC	Delaware
College Park Management LLC	Florida
College Park Management TRS, Inc.	Delaware
Commons Drive Associates Intermediate, LLC	Delaware
Commons Drive Associates, LLC	Delaware
The Commons II, LLC	Delaware
Croyden Avenue Associates Intermediate, LLC	Delaware
Croyden Avenue Associates, LLC	Delaware
Denton Associates Intermediate, LLC	Delaware
Denton Associates, LLC	Delaware
FDWR Parent LLC	Delaware

Fort Bliss/White Sands Missile Range Housing LP	Delaware
Fort Carson Family Housing, LLC	Colorado
Fort Detrick/Walter Reed Army Medical Center Housing LLC	Delaware
Fort Eustis/Fort Story Housing LLC	Delaware
Fort Gordon Housing LLC	Delaware
Fort Hamilton Housing LLC	Delaware
Gainesville Associates Intermediate, LLC	Delaware
Gainesville Associates, LLC	Delaware
GH 3175 JFK Associates GP, LLC	Delaware
GH University Crossings Associates GP, LLC	Delaware
GMH/AB Centex Military Communities LLC	Delaware
GMH/AEW Associates, LLC	Delaware
GMH AETC Housing Construction LLC	Delaware
GMH/ARMY Integrated LLC	Delaware
GMH/Benham Military Communities LLC	Delaware
GMH/Benham Military Communities II, LLC	Delaware
GMH/FW Military Communities LLC	Delaware
GMH/CENTEX Military Communities, LLC	Delaware
GMH Communities, LP	Delaware
GMH Communities GP Trust	Delaware
GMH Communities Services, Inc.	Delaware
GMH Communities TRS, Inc.	Delaware
GMH Independent Member I, Inc.	Delaware
GMH Independent Member II, Inc.	Delaware
GMH Military Housing, LLC	Delaware
GMH Military Housing- AETC General Partner LLC	Delaware
GMH Military Housing- AETC Limited Partner LLC	Delaware
GMH Military Housing — Bliss/WSMR General Partner, LLC	Delaware
GMH Military Housing — Bliss/WSMR Limited Partner, LLC	Delaware
GMH Military Housing- Carlisle/ Picatinny General Partner LLC	Delaware
GMH Military Housing- Carlisle/Picatinny Limited Partner LLC	Delaware
GMH Military Housing Construction LLC	Delaware
GMH Military Housing Development LLC	Delaware
GMH Military Housing—FDWR LLC	Delaware
GMH Military Housing—Fort Carson LLC	Delaware
GMH Military Housing — Fort Gordon LLC	Delaware
GMH Military Housing—Fort Hamilton LLC	Delaware
GMH Military Housing - Hampton Roads, LLC	Delaware
GMH Military Housing Investments LLC	Delaware
GMH Military Housing Management Fort Carson LLC	Delaware
GMH Military Housing Management LLC	Delaware
GMH Military Housing Navy Northeast LLC	Delaware
GMH Military Housing—Stewart Hunter LLC	Delaware
GMH/CENTEX Military Communities, LLC	Delaware
GMH Northeast Housing Design/Build LLC	Delaware
GMH/PHELPS Military Communities LLC	Delaware
GrandMarc UCR Intermediate, LLC	Delaware
GrandMarc UCR, LP	Delaware
Greenville Associates Intermediate, LLC	Delaware
Greenville Associates, LLC	Delaware
Hattiesburg Associates Owner, LLC	Delaware
Hattiesburg Associates, LLC	Delaware
Heron Drive Associates Intermediate, LLC	Delaware
Heron Drive Associates, LLC	Delaware
Keller Boulevard Associates Intermediate, LLC	Delaware
Keller Boulevard Associates, LLC	Delaware

Klotz Road Associates Intermediate, LLC	Delaware
Klotz Road Associates, LLC	Delaware
Knotty Pine Associates Intermediate II, LLC	Delaware
Knotty Pine Associates Intermediate, LLC	Delaware
Knotty Pine Associates, LLC	Delaware
La Riviera Drive Associates, LP	Delaware
La Riviera Drive Associates, LLC	Delaware
LA-31, LP	Pennsylvania
Lakeside Associates Intermediate, LLC	Delaware
Lakeside Associates, LLC	Delaware
Lanier Drive Associates Intermediate, LLC	Delaware
Lanier Drive Associates, LLC	Delaware
Lankford Drive Associates II, LLC	Delaware
Lankford Drive Associates Intermediate II, LLC	Delaware
Lankford Drive Associates Intermediate, LLC	Delaware
Lankford Drive Associates, LLC	Delaware
Lincoln Boulevard Associates Intermediate, LLC	Delaware
Lincoln Boulevard Associates, LLC	Delaware
Lubbock Main Street Associates Intermediate, LLC	Delaware
Lubbock Main Street Associates, LLC	Delaware
Lubbock Two Associates, LLC	Delaware
Lubbock Two Intermediate, LLC	Delaware
Lynchburg Associates Intermediate, LLC	Delaware
Lynchburg Associates LLC	Delaware
Monks Road Associates Intermediate, LLC	Delaware
Monks Road Associates, LLC	Delaware
Montezuma Road Associates Intermediate, LLC	Delaware
Montezuma Road Associates, LP	Delaware
Morgantown Associates Intermediate, LLC	Delaware
Morgantown Associates, LLC	Delaware
Nebraska Charleston Associates Intermediate, LLC	Delaware
Nebraska Charleston Associates, LLC	Delaware
Neff Avenue Associates Intermediate, LLC	Delaware
Neff Avenue Associates, LLC	Delaware
New Center Drive Associates Intermediate, LLC	Delaware
New Center Drive Associates, LLC	Delaware
New Towmed, LLC	Delaware
Nittany Crossing Intermediate, LLC	Delaware
Northeast Housing LLC	Delaware
Oak Tree Associates Intermediate, LLC	Delaware
Oak Tree Associates, LLC	Delaware
Orchard Trails Housing, LLC	Delaware
Palisades Drive Associates Intermediate, LLC	Delaware
Palisades Drive Associates, LLC	Delaware
Peach Grove Associates Intermediate, LLC	Delaware
Peach Grove Associates, LLC	Delaware
Pegasus Connection Associates Intermediate, LLC	Delaware
Pegasus Connection Associates, LLC	Delaware
Port Republic Associates Intermediate, LLC	Delaware
Racine Drive Associates Intermediate, LLC	Delaware
Racine Drive Associates, LLC	Delaware
Red Mile Road Associates Intermediate, LLC	Delaware
Red Mile Road Associates, LLC	Delaware
Reno Associates Intermediate, LLC	Delaware
Reno Associates, LLC	Delaware
Riverbend Associates Intermediate, LLC	Delaware

Riverbend Associates, LLC	Delaware
Rutherford Boulevard Associates Intermediate II, LLC	Delaware
Rutherford Boulevard Associates Intermediate, LLC	Delaware
Rutherford Boulevard Associates, LLC	Delaware
Sacramento Fourth Avenue Associates Intermediate, LLC	Delaware
Sacramento Fourth Avenue Associates, LLC	Delaware
Savoy Village Associates Intermediate, LLC	Delaware
Savoy Village Associates, LLC	Delaware
Seminole Ridge Associates Intermediate, LLC	Delaware
Seminole Ridge Associates, LLC	Delaware
Seminole Suites Associates Intermediate, LLC	Delaware
Seminole Suites Associates, LLC	Delaware
Silo Court Associates Intermediate, LLC	Delaware
Silo Court Associates, LLC	Delaware
South Carolina Associates Intermediate, LLC	Delaware
South Carolina Associates, LLC	Delaware
Southeast Region I Intermediate, LLC	Delaware
Southeast Region I, LLC	Delaware
Southeast Region II, LLC	Delaware
Southeast Region III, LLC	Delaware
Southeast Region IV Intermediate, LLC	Delaware
Southeast Region IV, LLC	Delaware
Southern Eagle Associates Intermediate, LLC	Delaware
Southern Eagle Associates, LLC	Delaware
State College Intermediate, LLC	Delaware
Sterling Way Associates Intermediate, LLC	Delaware
Sterling Way Associates, LLC	Delaware
Stewart Hunter Housing LLC	Delaware
Sycamore Avenue Associates Intermediate, LLC	Delaware
Sycamore Avenue Associates, LLC	Delaware
Third Street Associates Intermediate, LLC	Delaware
Third Street Associates, LLC	Delaware
Towmed Housing, LLC	Delaware
Towmed Intermediate, LLC	Delaware
Twenty Seventh Street Associates Intermediate, LLC	Delaware
Twenty Seventh Street Associates, LLC	Delaware
University Commons Associates, LLC	Delaware
University Commons Intermediate Associates, LLC	Delaware
Urbana Associates Intermediate, LLC	Delaware
Urbana Associates, LLC	Delaware
Vairo Boulevard Associates Intermediate, LLC	Delaware
Vairo Boulevard Associates, LP	Pennsylvania
Varsity Lane Associates Intermediate, LLC	Delaware
Varsity Lane Associates, LLC	Delaware
W9/JP-M Real Estate Limited Partnership	Delaware
Washington Avenue Associates Intermediate, LLC	Delaware
Washington Avenue Associates, LLC	Delaware
WHGMH Realty, L.P.	Delaware
Willowtree Associates I Intermediate Non-Managing, LLC	Delaware
Willowtree Associates I Intermediate, LLC	Delaware
Willowtree Associates I, LLC	Delaware
Willowtree Associates II Intermediate Non-Managing	Delaware
Willowtree Associates II Intermediate, LLC	Delaware
Willowtree Associates II, LLC	Delaware
Woodhaven Circle Associates II, LLC	Delaware
Woodhaven Circle Associates Intermediate II, LLC	Delaware

Woodhaven Circle Associates Intermediate, LLC	Delaware
Woodhaven Circle Associates, LLC	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-121853) pertaining to the Equity Incentive Plan of GMH Communities Trust of our report dated July 27, 2006, except Note 13 (for 2005 and 204) as to which the date is March 15, 2007, with respect to the consolidated financial statements and schedules of GMH Communities Trust and the combined financial statements of The GMH Predecessor Entities included in the Annual Report on Form 10-K for the year ended December 31, 2006.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 15, 2007

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-121853) pertaining to the Equity Incentive Plan of GMH Communities Trust of our report dated March 14, 2007, with respect to the consolidated financial statements and schedule of GMH Communities Trust and the combined financial statements of The GMH Predecessor Entities, GMH Communities Trust management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of GMH Communities Trust, and our report, dated March 15, 2007, with respect to the financial statements for the year ended December 31, 2006 of Fort Carson Family Housing, LLC, included in the Annual Report on Form 10-K for the year ended December 31, 2006.

/s/ Reznick Group, P.C.

Baltimore, Maryland
March 15, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Gary M. Holloway, Sr., certify that:

1.I have reviewed this annual report on Form 10-K of GMH Communities Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ GARY M. HOLLOWAY, SR.
	Gary M. Holloway, Sr.
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, J. Patrick O’Grady, certify that:

1.I have reviewed this annual report on Form 10-K of GMH Communities Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2007	/s/ J. PATRICK O’GRADY
	J. Patrick O’Grady
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

GMH COMMUNITIES TRUST

CERTIFICATION REQUIRED BY
RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Gary M. Holloway, Sr., Chairman, President and Chief Executive Officer of GMH Communities Trust, a Maryland real estate investment trust (the “Company”), hereby certify that, to my knowledge:

(1)   The Company’s annual report on Form 10-K for the year ended December 31, 2006 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

*  *  *

/s/ GARY M. HOLLOWAY, SR.

Gary M. Holloway, Sr.

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Date: March 16, 2007

EX-32.2

Exhibit 32.2

GMH COMMUNITIES TRUST

CERTIFICATION REQUIRED BY
RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, J. Patrick O’Grady, acting in the capacity of Executive Vice President and Chief Financial Officer of GMH Communities Trust, a Maryland real estate investment trust (the “Company”), hereby certify that, to my knowledge:

(1)   The Company’s annual report on Form 10-K for the year ended December 31, 2006 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

*  *  *

/s/ J. PATRICK O’GRADY

J. Patrick O’Grady

Executive Vice President and
Chief Financial Officer

(Principal Financial Officer)

Date: March 16, 2007